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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Franklin Resources in Focus
Based in San Mateo, Franklin Resources (BEN) is in the Finance sector, and so far this year, shares have seen a price change of 20.81%. The investment manager is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 3.71% compared to the Financial - Investment Management industry's yield of 1.49% and the S&P 500's yield of 1.35%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.12 is up 3.7% from last year. Franklin Resources has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.41%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Franklin Resources's current payout ratio is 40%. This means it paid out 40% of its trailing 12-month EPS as dividend.
BEN is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $3.15 per share, with earnings expected to increase 20.69% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, BEN is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Franklin Resources, Inc. (BEN) : Free Stock Analysis Report
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