Last update on 2024-06-27

Franklin Resources (BEN) - Dividend Analysis (Final Score: 6/8)

In-depth analysis of Franklin Resources (BEN) dividend reveals a robust 6/8 score. Learn more about sustainability, growth, and yield metrics here.

Short Analysis - Dividend Score: 6

We're running Franklin Resources (BEN) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis of Franklin Resources (BEN) showcases the company's performance on various fronts using an 8-criteria scoring system. BEN achieved a score of 6 out of 8, reflecting several strengths and some weaknesses in its dividend policy. While the current dividend yield of 3.02% falls short of the industry average of 4.33%, it has managed to pay dividends consistently over 25 years and maintains an average payout ratio of 43.89%. However, issues such as significant volatility in dividend yield and growth rates, inconsistencies in earnings coverage, and a drop in free cash flow coverage in 2019 raise concerns. Stable dividend payouts and a robust buyback policy are among its positives, but the lack of consistent growth may deter investors seeking predictability.

Insights for Value Investors Seeking Stable Income

Franklin Resources (BEN) has a good track record for distributing dividends and maintaining a low payout ratio, which signals financial prudence. However, given the current yield and historical volatility, potential investors might prefer alternatives with more stable and higher yields. If you’re looking for reliable dividend income with occasional high growth potential and can tolerate some fluctuation, BEN could be considered. Those prioritizing consistent and higher-than-industry-average income should explore other options.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield demonstrates how much a company pays out in dividends each year relative to its stock price. A higher yield can indicate a good income investment.

Franklin Resources (BEN) has a current dividend yield of 3.0211% which is lower than the industry average of 4.33%. Historical data shows significant volatility in BEN's dividend yields, peaking at 12.5421% in 2018. Despite this, BEN's yield has never consistently outperformed the industry average, which is a negative indicator for potential income-focused investors, especially in the context of higher-yielding alternatives in the industry. However, it's worth noting that BEN's stock price has seen significant fluctuations, directly impacting yield calculations.

Average annual Growth Rate higher than 5% in the last 20 years?

Analysis should focus on the growth trajectory of dividends per share over a sustainable period to gauge how well a company rewards its shareholders.

Reviewing the dataset for Franklin Resources (BEN) over the last 20 years reveals a highly volatile Dividend Per Share (DPS) growth, with significant fluctuations year-on-year. Notably, there are extremely high growth rates interspersed with negative rates in various years, indicating inconsistency. The average dividend growth rate sits at around 70.27%, which is very high and may skew the perception of sustainability. While the high average seems promising, the sharp declines in certain years and unstable growth trajectory make it difficult to ascertain a reliable, consistent 5% dividend growth. This bursting and dipping raises questions about predictability and consistency. Thus, despite a high average growth rate, the overall trend does not offer a stable picture and is rather unfavorable for investors prioritizing a steady dividend growth.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio measures the percentage of earnings a company pays to its shareholders in the form of dividends. A ratio consistently below 65% over a long period is usually deemed sustainable as a company maintains sufficient earnings to reinvest into the business or cover unforeseen expenses.

Franklin Resources (BEN) has an average payout ratio of approximately 43.89% over the last 20 years, which is substantially below the 65% threshold. This indicates a generally sustainable payout policy. However, it is essential to note some years such as 2009 and 2018 when the ratios spiked to 99.37% and 261.82% respectively. Such anomalies warrant further investigation, though the overall trend supports a healthy and sustained dividend distribution. In many years, the payout ratio remained significantly low, even under 20% in some instances, reinforcing the company's conservative dividend approach and financial stability.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings when a company's earnings per share (EPS) are consistently higher than its dividends per share (DPS). This signifies financial health and sustainable dividend payouts.

Examining Franklin Resources' (BEN) EPS and DPS data from 2003 to 2023, we notice varied trends in coverage ratio, indicating some inconsistencies. Good coverage values (above 1) make a strong case for sustainability, but poor ratios in numerous years suggest cautious optimism. Although the 2023 ratio (0.5) reflects slightly better coverage than past troubled years, continual close monitoring and sustainable EPS growth are crucial to ensure BEN's long-term dividend reliability.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicate the company's ability to support its dividend payments through its operating cash flow. A low or negative ratio might indicate financial stress or unsustainable dividend practices.

Assessing the data over the past two decades, Franklin Resources has generally managed to maintain dividends that are well covered by its free cash flow, notably between 15% and ~100%. However, attention is drawn to the year 2019, where free cash flow turned negative, resulting in a negative dividend coverage ratio of -16.16, indicating reliance on other financial means than cash flow for sustaining dividends. Post-2020, coverage ratios hover above 45%, which are solid and demonstrate resilience. Overall, while there's a significant disruption in 2019, the general trend remains strong and healthy.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years refer to a company's ability to consistently pay and maintain or gradually increase its dividend per share, crucial for income-seeking investors.

Analyzing Franklin Resources (BEN), the company’s dividend per share over the past 20 years indicates mixed performance with fluctuations and occasional spikes. Most notably, the year 2009 saw a significant increase in dividends to $1.2833 per share from $0.27 in the prior year—a nearly 375% increase—followed by a sharp fall. Similarly, in other instances, dividends surged dramatically from previous years and then corrected. However, considering the criterion's requirement that there should not be any drops over 20%, the data confirms there was no such drop larger than 20% year-over-year, even with visible irregularities in the dividend distribution. While it's favorable that no year experienced a greater than 20% drop in dividends, the volatility signifies less stability than desirable for truly conservative income investors seeking not just stable but predictable returns.

Dividends Paid for Over 25 Years?

This criterion examines whether Franklin Resources (BEN) has paid dividends consistently for at least the last 25 years. Consistency in dividends is indicative of financial stability and shareholder value.

Franklin Resources (BEN) has paid dividends consistently over the past 25 years, as illustrated by the provided data spanning from 1998 to 2023. Analyzing the figures, there is a noticeable trend of increasing dividends over the years, with some fluctuations. For example, dividends per share rose from $0.0683 in 1998 to $0.9 in 2023, despite some years like 2001 ($0.074) and 2009 ($1.2833). Such a long-term trend of dividend payments demonstrates the company’s commitment to returning value to shareholders. This consistency is a positive indicator for potential and current investors as it signals financial stability and reliable income generation.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over the past 20 years indicate a company's commitment to returning value to shareholders even when it doesn't pay or increase dividends. Repurchases reduce the number of outstanding shares, enhancing per-share metrics like earnings per share (EPS) and dividends per share (DPS), thereby increasing shareholder value.

Franklin Resources has demonstrated a consistent effort in stock repurchase activities over the past 20 years, reducing its outstanding shares from 765,730,964 in 2003 to 490,000,000 in 2023. This indicates a steady buyback program. Years like 2004, 2007, 2008, and onwards up to 2022 have been particularly notable in these efforts. An average repurchase rate of -2.1826% annually underscores the company's reliable commitment to share reduction. This trend is considered positive as it shows Franklin Resources' dedication to enhancing shareholder value through consistent stock buybacks despite market conditions.