Friday, January 2, 2015

Stock Analysis of Franklin Resources

Franklin Resources Inc. (BEN) is a publicly owned asset management holding company. The firm provides its services to individuals, institutions, pension plans, trusts, and partnerships. This dividend champion has paid dividends since 1981 and managed to increase them for 34 years in a row.

The company has managed to deliver a 17.70% average increase in annual EPS over the past decade. Franklin Resources is expected to earn $3.73 per share in 2014 and $4.07 per share in 2015. In comparison, the company earned $3.37/share in 2013.

The annual dividend payment has increased by 15% per year over the past decade, which is lower than the growth in EPS. The company has preferred share repurchases to paying dividends, although it has kept raising dividends at a very healthy clip. 

Currently, Franklin Resources is selling for times 14.80 times forward earnings and yields 0.90%. Many dividend investors overlook the company, because of the low yield. I believe that they are wrong to do so however, because the company offers an attractive valuation today, opportunity for high earnings and dividend growth over time, and the potential for further expansion of the dividend payout ratio. While I do have a minimum yield requirement, I am considering initiating a position in the stock sometime in late 2014 or early 2015, which of course would be subject to availability of cash and other ideas. I would of course start with a small position, but I do believe this company will bring wealth to shareholders in the future. I am hopeful for a stock market decline, which would result in temporary decreases in earnings and share prices. Accumulating the whole position after a five year bull market does not sound very tempting. This is why dollar cost averaging would really help in accumulating a position in asset managers like Franklin Resources.

Check the full article at Seeking Alpha

Full Disclosure: None

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