Today my analysis Pollie-code style of Franklin Resources ($BEN).
In my article last month about creating my own Dividend factory, I did some data mining for companies that pay dividends in January/April/July/October. I was looking for high quality dividend stocks to complement my Vrijheid Fonds.
I used the famous CCC-list of David Fish and only looked at the Dividend Champions (25 or more Straight Years Higher Dividends). And with the help of my Pollie-code I filtered out 4 companies.
Today’s analysis is of one of the 4 companies I filtered out. And in light of diversification of my Vrijheid Fonds, I start with the financial company.
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 36 years in a row. It is therefore a Dividend Aristocrat on the CCC-list from David Fish! (No.73). They are a three star stock on Morningstar.com. That’s a Passed!
Dividend Yield > 2.5%: The dividend Yield of BEN is 2.04%. This is below the industry average of 4.3%. But it is above the 5 years average (1.1%). The Yield is below the requirements of the Pollie-Code, and therefore it fails the second Pollie-code.
Dividend payout <70%: The dividend payout is roughly 26%. This is below the maximum ratio. This’s what a DGI wants. So also passed for this point.
DGR 1 year > 0%: The dividend growth rate (DGR) for 1, 3, 5 and 10 years are 25.0, 18.8, 15.4 and 16.2. With a 3-years average around 18% this looks very good! And it is above the requirements of the Pollie-code, so 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. BEN has a current P/E ratio of 13.11. The industry average is 21.6. The P/E ratio is below the industry average. And it is lower that its 5-years average (14.4). This is a pass.
EPS > 0: The EPS is 2.76. So BEN passed the sixth 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 another pass.
Market Cap. > 100M: No problem at this point. The Market cap. Is more than $ 21.072 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 17.4. This is therefore a pass on the Pollie-code.
Stock price 52 week high-25%: The 52 week high and low are: 44.02 and 30.56. This means that BEN will be in my buying zone when the stock price is below 40.66 ((44.02-30.56)*0,75 + 30.56). At this moment BEN is trading for $35.48. So it is a pass on the Pollie-Code.
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 1.69.
When I look at my analysis, BEN passed 9 out of 10 from the Pollie-code! BEN only failed The Pollie-code at the dividend Yield.
When I take a closer look, this company gives me a smile, despite the ‘low’ yield. This because I prefer a stock with a low yield and a high DGR above a stock with a higher yield and an average of low DGR.
In June Ben announced a quarterly cash dividend in the amount of $0.18 per share payable on July 15, 2016 to stockholders of record holding shares of common stock at the close of business on June 30, 2016. The quarterly dividend of $0.18 per share is equivalent to the dividend paid for the prior quarter and represents a 20% increase over the quarterly dividend paid for the same quarter last year.
Furthermore, the company’s Board of Directors authorized the company to purchase, from time to time, up to an additional 50.0 million shares of its common stock in either open market or off-market transactions. The size and timing of these purchases will depend on price, market and business conditions and other factors. The stock repurchase program is not subject to an expiration date. The new board authorization is in addition to the existing authorization, of which approximately 12.6 million shares remained available for repurchase at May 31, 2016. The company repurchased approximately 24.6 million shares during the period October 1, 2015 to May 31, 2016. Shares repurchased under the program are retired.
All this information together I will put BEN on my watch list for my Vrijheid Fonds.
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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