Last update on 2024-06-27

Broadridge Financial Solutions (BR) - Dividend Analysis (Final Score: 7/8)

In-depth dividend analysis of Broadridge Financial Solutions (BR), scoring 7/8 on the 8-criteria system, emphasizing performance, sustainability, and shareholder value.

Short Analysis - Dividend Score: 7

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

We're analyzing Broadridge Financial Solutions (BR) based on 8 key criteria to evaluate its dividend policy. BR scored 7 out of 8, reflecting a strong policy. They have a dividend yield higher than the industry average, showing good shareholder returns. The average dividend growth rate is 17.93% over the past 20 years, indicating strong growth. Their payout ratio of 43.31% is sustainable and healthy, and their earnings sufficiently cover their dividends, suggesting good financial health. The coverage by free cash flow has also improved, with recent years showing a strong capacity to cover dividends. BR's dividends have been stable since they started paying in 2007, although they haven't yet paid dividends for 25 years, which falls slightly short of that particular criterion. Additionally, BR has a consistent history of stock repurchases, further proving their commitment to shareholder value.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Broadridge Financial Solutions (BR) shows strong performance and stability in their dividend policy. With a high dividend yield, substantial growth rate, and responsible payout and coverage ratios, it presents a positive investment opportunity for dividend-focused investors. Although they haven't met the 25-year dividend payment criterion yet, their trends and improvements suggest strong potential for future growth. It is recommendable to consider BR as a valuable addition to a dividend-focused portfolio.

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 the ratio of a company's annual dividend compared to its share price, indicating the cash return on investment.

Broadridge Financial Solutions (BR) exhibits a dividend yield of 1.4824%, surpassing the industry average of 1.12%. Over the past 20 years, BR's dividend yield has varied significantly, peaking at 2.972% in 2012 and dipping as low as 0.8025% in 2007. Recent years show stabilization in the range of 1.3% to 2%. Comparatively, the industry average has slightly fluctuated, typically lingering around 1% to 2%. Given BR’s stock price closed at $205.75 in 2023 and is consistently increasing along with the dividend per share (from $0.18 in 2007 to $3.05 in 2023), this higher-than-average yield illustrates a strong shareholder value proposition. However, the decreasing yield in 2023 may reflect the stock price outpacing dividend growth. Overall, the trend is still positive as it offers a better return than the industry norm.

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

The Dividend Growth Rate measures how much the company's dividend payments have increased over time.

Broadridge Financial Solutions (BR) exhibits a wide range of dividend growth rates over the years from 2006 to 2023, with fluctuating increases such as 94.44%, 61.54%, and more moderate rises. Calculating the average dividend growth rate over this period gives us 17.93%, which is well above the 5% benchmark. This is a favorable trend indicating that Broadridge's dividends have been growing considerably, which is attractive for dividend-seeking investors.

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

The payout ratio measures the proportion of earnings a company pays its shareholders in the form of dividends. An average payout ratio lower than 65% is generally considered sustainable.

Broadridge Financial Solutions (BR) has an average payout ratio of approximately 43.31% over the past 20 years. This indicates that the company has maintained a sustainable payout policy, as an average below 65% is typically considered favorable. The lowest was 0% in 2006, likely indicating either a reinvestment phase or a lack of sufficient earnings. The highest was approximately 70.15% in 2012, which slightly exceeds the 65% benchmark but appears to be an outlier. Overall, the company's consistent payout ratios below the 65% threshold in most years suggest a stable and responsible dividend strategy, contributing positively to its financial health and attractiveness to dividend-focused investors.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings indicates that a company generates enough profit to afford its dividend payouts, signaling financial health.

From 2006 to 2023, Broadridge Financial Solutions (BR) generally shows a good trend in its ability to cover dividends with earnings. Although there are fluctuations, the key point is that dividend coverage consistently remains at sustainable levels. The lowest coverage was in 2006 at 0%, during which dividends were not paid out. Coverage improves significantly by 2023, reaching 56.93%. This increase is a favorable indicator and suggests that the company has better financial health over time. The consistent dividend growth (from $0.18 in 2007 to $3.05 in 2023) alongside increasing EPS (from $1.201 in 2006 to $5.3577 in 2023) also underpins a positive trend, reflecting prudent management and robust earnings growth.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

Broadridge Financial Solutions (BR) demonstrates varying degrees of dividend coverage by its free cash flow over the years. Analyzing the metrics from 2006 to 2023 reveals periods of both strong and insufficient coverage. In 2010, the free cash flow was $440.5 million while the dividend payout amount was $66.6 million, resulting in a cover ratio of 15.12%, which is relatively low. However, as we move to recent years, specifically in 2023, there is a free cash flow of $748.1 million against a dividend payout of $331 million, equating to a cover ratio of 44.25%. This trend indicates substantial improvement. A high ratio over 100% indicates dividends are more than well covered by free cash flow, suggesting financial health. Thus, while earlier years posed challenges, the recent figures showcase BR’s enhanced capacity to cover dividends, underscoring a strong financial position.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Broadridge Financial Solutions (BR) and why it is important to consider

Stable dividends over the past 20 years are crucial as they indicate the company's consistent ability to generate earnings and return capital to shareholders. A drop by more than 20% would suggest volatility and potential financial instability, affecting income-seeking investors' confidence in the stock.

Dividends Paid for Over 25 Years?

This criterion assesses whether a company has a mature and stable history of paying dividends over a span of 25 years.

Broadridge Financial Solutions (BR) has shown a consistent increase in its dividend payouts since starting in 2007. For the last 17 years, the company has steadily increased its dividend per share from $0.18 in 2007 to $3.05 in 2023. Despite this impressive growth and commitment to returning value to shareholders, the company has not reached the milestone of paying dividends for over 25 years yet. This trend is positive for investors seeking growing income streams, albeit it does not fully meet the criterion of a 25-year history of dividend payments.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a company's commitment to returning value to shareholders. It lowers the share count, enhancing per-share metrics.

Broadridge Financial Solutions (BR) shows a fairly regular pattern of stock repurchases over the past two decades, specifically focusing on the period from 2010 to 2020. The share count has decreased from 139.1 million in 2010 to 114.7 million in 2020, revealing a deliberate effort to repurchase shares. The average repurchase rate of -0.942 indicates a consistent reduction in shares outstanding. This is a good trend as it signals effective capital management and a focus on increasing shareholder value.