Stock Analysis Pollie-style – Franklin Resources (BEN) – 2019
Nowadays with new all-time highs almost every week, it becomes more and more difficult to find good shares for reasonable prices. But not only new companies can be interested, my existing holdings can also be very interesting for the right price.
That is why I’ve turned my focus on my own Dividend Aristocrats, to look how they are doing and if some buying opportunities are available to average down.
So, today I will do an analysis of one of the companies I already own. If we take a look at how my dividend is spread over the year, you can see that the months January/April/July/October are lacking a bit. So, I decided to look into high quality dividend stocks that pay their dividend in these months.
For my analysis I use a lot of data from the Internet and from the company itself. But most data I get from the famous CCC-list, which was created by David Fish and is now maintained by Justin Law.
One of the companies that I own and that pay its dividend in the first month of every quarter is Franklin Resources.
This analysis is on Franklin Resources Inc. (BEN).
From google finance: Franklin Resources, Inc. (Franklin), is a holding company. Franklin together with its various subsidiaries (collectively, the Company), is referred to as Franklin Templeton Investments, is a global investment management organization offering investment management and related services under the Franklin, Templeton, Mutual Series, Bissett, Fiduciary and Darby brand names. It provides services to investment funds in jurisdictions globally, which include the United States- and non- United States-registered open-end and closed-end funds, unregistered funds, and institutional, high net-worth and separately-managed accounts. The Company’s investment management and related services include fund administration, shareholder services, transfer agency, underwriting, distribution, custodial, trustee and other fiduciary services. Its sponsored investment products include a range of equity, hybrid, fixed-income and cash management funds and accounts, including alternative investment products.
Can I explain this to a 10-year old? What Does This Company Do?
This company owns mutual funds (it is a mutual funds company) and manages them. You can invest your money by buying a mutual fund from them.
Dividend Aristocrat: BEN is paying Dividend for 39 years in a row. It is therefore a Dividend Aristocrat on the CCC-list from David Fish! (No.66). That’s a Pass!
Dividend Yield > 2.5%: The dividend Yield of BEN is 3.61%. This is below the industry average of 4.32%. But it is above the 5 years average (2.00%). The Yield is above the requirements of the Pollie-Code, and therefore it passes the second Pollie-code.
Dividend payout <70%: The dividend payout is roughly 40%. This is below the maximum ratio. This’s what a DGI wants. So BEN also passed for this point.
DGR 1 year > 0%: The dividend growth rate for 1, 3, 5 and 10 years are 15, 15.3, 18.7 and 13.2. With a 3-years average around 15% this looks very good! And it is above the requirements of the Pollie-code, so again it is a pass.
P/E-ratio < 15: This is an easy metric that is well documented. It can be used as a quick metric to identify stocks that may potentially be undervalued. I use this to identify stocks that may be discounted compared to the overall stock market. BEN has a current P/E ratio of 10.68. The industry average is 20.5. The P/E ratio is below the industry average. And it is lower that its 5-years average (15.8). This is a pass.
EPS > 0: The EPS is 2.53. So BEN passes also the sixth metric of the Pollie-Code
ROE > 10%: Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. The current ROE is 14%. This is above the requirements from the Pollie-Code. Therefore, it is a pass.
Market Cap. > 100M: No problem at this point. The Market cap. Is more than $ 13.740 Mil. You guested it already: Another pass.
Chowder Rule > 12: Named after “Seeking Alpha” member Chowder. This is a method of identifying candidates for purchase based on a combination of yield and (5-year) dividend growth rate. When the sum of these elements is above 12%, the company presents an attractive entry point (8% for utilities). When the figure is above 8%, an existing holding is still considered worthy of being retained. The current Chowder rule is 22.7. This is therefore a pass on the Pollie-code.
Stock price 52wk high-25%: The 52 wk. high and low are: 35.45 and 25.34. This means that BEN will be in my buying zone when the stock price is below 32.92 ((35.45-25.34)*0.75 + 25.34). At this moment BEN is trading for $28.96. Therefore, it is another pass on the Pollie-Code.
Other Key figures
Beta: I think it’s important to have low Beta stocks in my portfolio. This helps to have a stable income all the time, even when the market has a rapid decline. The Beta for BEN is 1.22.
Since last year it is moving in the right direction.
Debt/Equity ratio: The Debt/Equity ratio of BEN is around 0.07. This is nice and low. I really like these kinds of Debt/Equity ratios.
Net debt/Ebitda: The net debt to EBITDA ratio is a debt ratio that shows how many years it would take for a company to pay back its debt if net debt and EBITDA are held constant. If a company has more cash than debt, the ratio can be negative. This metric tells something about the health of the company. I like to see ratios below 3 and will be ecstatic with ratios below 1. The Net Debt/EBITDA ratio of BEN is around 0.41. Big smiles over here.
When I look at my analysis, BEN has passed all the requirements from the Pollie-code! This is great!
If I look at this analysis, I’m still happy to be an owner of this company 😁. The dividend is well covered, and Franklin Resources appears well positioned to continue its Dividend Aristocrat membership. The share price has felt some headwinds the last 12 months and is oversold in my humble opinion. And with today’s stock prices it may present a buying opportunity for income investors. I will definitely leave BEN on my watch list for some extra stocks in the (near) future. I love stocks with a good dividend yield and a high DGR.
What are you – the readers, thoughts on Franklin Resources Inc.? Is it a buy, do you own it Please comment on my analysis and thanks for stopping by!
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