Last update on 2024-06-27

BlackRock (BLK) - Dividend Analysis (Final Score: 5/8)

BlackRock's dividend policy achieves a 5/8 score, reflecting strong but varied criteria performance in yield, growth, payout ratio, and stability over the past 20 years.

Short Analysis - Dividend Score: 5

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

In our dividend analysis of BlackRock (BLK), we used an 8-criteria scoring system to evaluate the stability and performance of the company's dividend policy. Here's a summary of our findings: 1. Dividend Yield: BlackRock's dividend yield of 2.4637% is below the industry average of 4.33%, which might be less attractive for income-focused investors. 2. Average Annual Growth Rate: From 2003 to 2023, BlackRock's average Dividend Ratio growth was 23.74%, signaling strong and consistent growth, which is beneficial for long-term investors. 3. Payout Ratio: BLK's payout ratio has been below 65%, indicating it retains a good portion of its earnings for growth and cushions against market downturns. 4. Dividend Coverage by Earnings: BlackRock's dividends are well-covered by earnings, showcasing financial stability and a balanced approach between earnings and payouts. 5. Dividend Coverage by Cash Flow: The company has maintained a robust free cash flow to cover its dividends, reflecting prudent financial management. 6. Stable Dividends: BLK has shown strong and reliable dividend growth over 20 years, making it attractive for income-focused investors. 7. Dividends for Over 25 Years: BLK has been paying dividends for 20 years, just short of the ideal 25-year mark, yet shows significant growth in that period. 8. Reliable Stock Repurchases: BlackRock has consistently repurchased stocks, showing financial strength and a commitment to enhancing shareholder value. Dividend Score: 5.

Insights for Value Investors Seeking Stable Income

Given the relatively low dividend yield compared to the industry, BlackRock might not be the best choice for investors who prioritize immediate income. However, the company showcases strong and consistent dividend growth, sound financial health, and a solid commitment to returning value to shareholders over the long term. The reliable dividend coverage by earnings and cash flow, along with their stock repurchase program, aligns with a stable investment strategy. Potential investors may want to consider BlackRock if they are focused on long-term growth and financial stability rather than just the highest immediate income.

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 is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It's important because it provides a measure of the income generated by the investment.

BlackRock's (BLK) current dividend yield stands at 2.4637%, which is noticeably lower than the industry average of 4.33%. This could be interpreted as a suboptimal yield for income-focused investors, as BlackRock offers less annual income relative to other companies in the finance sector. Historically, BLK's dividend yield has fluctuated, reaching peaks such as 3.355% in 2011 and hitting lows like 0.7532% in 2003. Comparing this to the industry, we see a general industry trend towards higher yields, especially post-2008. Despite BlackRock's robust stock price growth from $53.11 in 2003 to $811.8 in 2023, its dividend growth hasn't kept pace with the industry averages, indicating a potentially less attractive income-generation profile. However, the consistent increase in dividend per share over the years reflects strong financial health and a commitment to returning value to shareholders. But for those prioritizing yield, BlackRock may not meet expectations.

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

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend payments. Consistently high growth is a sign of a healthy, financially solid, and shareholder-friendly company.

From 2003 to 2023, BlackRock's average Dividend Ratio is approximately 23.74%. This is significantly above 5%, indicating strong and consistent dividend growth over the past 20 years. This trend is beneficial for long-term investors seeking income growth and suggests that BLK has maintained robust profitability and cash flow. Moreover, a higher dividend growth rate often signifies management's confidence in the company's future earnings. Therefore, the trend in BlackRock's dividend growth rate is very positive and reinforces its attractiveness as a dividend-paying stock.

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

Explain the criterion for BlackRock (BLK) and why it is important to consider

A payout ratio refers to the proportion of earnings a company distributes to its shareholders in the form of dividends, typically expressed as a percentage. An average payout ratio below 65% suggests that BlackRock retains a substantial portion of its earnings, signaling robust financial health. This leaves sufficient funds for reinvestment, growth, and cushioning against potential market downturns.

Dividends Well Covered by Earnings?

Dividends well covered by earnings imply financial stability for the company and the ability to sustain dividend payments long-term.

The Earnings per Share (EPS) versus Dividend per Share (DPS) ratio for BlackRock demonstrates prudent fiscal management. Historically, the coverage ratios ranged from approximately 0.1695 in 2003 to 0.5427 in 2023. This means that, even in the weakest year for coverage, EPS sufficiently exceeded DPS, ensuring dividends were well backed by earnings. An average EPS coverage ratio above 0.4 consistently shows resilience and sustainable dividend distribution, reflecting well on BlackRock's commitment to returning value to its shareholders. This trend is favorable, showcasing a strong balance between earnings and payouts, avoiding over-leveraging dividends at the expense of company growth or solvency.

Dividends Well Covered by Cash Flow?

Evaluate how well dividends are covered by the company's cash flow. It's important because it indicates whether the company generates enough cash to pay its dividends, impacting financial stability.

Over the years, BlackRock (BLK) maintained a robust free cash flow, peaking at $4.60 billion in 2021. Meanwhile, the dividend payout gradually increased to $3.04 billion in 2023. The dividend coverage, calculated as Free Cash Flow divided by Dividend Payout, shows significant improvement over the years. Starting from 0.15 in 2003, the coverage ratio significantly improved, marking 0.79 in both 2019 and 2023. BlackRock's ability to cover its dividends with cash flow reflects a financially stable and well-managed firm, demonstrating prudence in balancing payouts with its cash generation capabilities. Overall, the trend appears positive and indicates good financial health.

Stable Dividends Since the Company Began Paying Dividends?

BlackRock (BLK) has demonstrated stable dividends over the past 20 years by not reducing its dividend per share by more than 20%. This criterion is crucial for income-seeking investors who rely on consistent dividend payments for their investment returns.

Analyzing the data, we observe that BlackRock has significantly increased its dividends over the years, from $0.4 in 2003 to $20 in 2023, demonstrating robust growth. However, it should be noted that in 2015, there was a slight drop from $9.65 in 2014 to $8.72, representing a decrease of about 9.6%, which is within the acceptable range of stability. Given this performance trend, BlackRock has shown strong and reliable dividend growth, affirming its attractiveness for income-focused investors. The overall trend is very positive, enhancing investment appeal.

Dividends Paid for Over 25 Years?

Whether a company has consistently paid dividends for over 25 years is a key indicator of its financial stability and commitment to returning value to shareholders.

Reviewing the dividend per share (DPS) data for BlackRock (BLK) from 1998 to 2023, it is observed that the dividends commenced in 2003. Hence, BlackRock has been paying dividends for 20 years. While this falls short of the 25-year benchmark, the trend shows a progressive increase from $0.4 per share in 2003 to $20 per share in 2023. This significant growth in dividends indicates a strong, upward trend in the company's financial health and its solid commitment to rewarding its shareholders. Nevertheless, it does not strictly meet the 25-year threshold, implying there might be a lower historical consistency when evaluated against companies with a longer track record.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over the past 20 years reflect the company's confidence in its own growth and financial stability.

BlackRock has demonstrated a consistent pattern of stock repurchases over the past two decades, particularly from 2011 onwards. The number of shares decreased significantly from 192,692,047 in 2010 to 149,300,000 by 2023. This trend suggests a commitment to enhancing shareholder value and indicates financial strength and confidence. The average repurchase rate of 5.1588% also reinforces the notion of BlackRock's reliable and strategic buyback program, contributing positively to investors' perception. This is a good trend for the given criterion.