Banking & Finance

Daily Dividend: Value & Yield in Asset Managers (BLK, FII, BEN, LM, TROW, IVZ, EV)

It’s the Daily Dividend at 11:00 AM.  We often look for value, growth, and dividends in financial stocks.  Banks have been elusive on the dividend front until just the last couple of days, although we did give a list of banks which did not kill their dividends and already had a payout to shareholders ahead of time.  After looking through a “value” report from Zacks Investment Research this morning, we could not help but notice how BlackRock, Inc. (NYSE: BLK) stood out against its money management peers.

While the report highlighted the relative value of BlackRock, the boosted dividend payment of late, and a relatively cheap P/E ratio for forward estimates (14.8), what stood out the most was that it seems very likely to 24/7 Wall St. that the competing asset management firms will begin offering higher payouts via dividend hikes.  Not all will catch up to BlackRock in yield with its 2.9% payout, but it still looks as though the rise in assets under management and the recovery of the stock market in the last two years will cause its rivals to follow suit.

Federated Investors, Inc. (NYSE: FII) also stood out in the pack of asset management firms.  Its dividend is close to 3.7%.  At $26.32, it trades at about 14.5-times the forward Thomson Reuters estimate of $1.81 EPS for fiscal Dec-2011.  With the exception of a higher payout in quarter a year ago, the dividend has been static at $0.24 per quarter back to 2008.

Franklin Resources Inc. (NYSE: BEN) has a 0.8% dividend yield.  At $118.25, it trades at 14.2-times Thomson’s Reuters estimates of $8.32 EPS for fiscal 2011.  This one hiked its dividend back in December’s payout to $0.25 from $0.22 per quarter.

Legg Mason Inc. (NYSE: LM) has a 0.7% dividend yield. At $34.64, it trades at about 16.7-times the Thomson Reuters estimate of $2.07 for its March-2012 fiscal year-end.  It raised its dividend two quarters ago to $0.06 from $0.04 per quarter.

T. Rowe Price Group, Inc. (NASDAQ: TROW) has a 1.9% dividend yield.  At $63.15 it trades at 19.5-times the Dec-2011 fiscal estimate from Thomson Reuters.  The new 1.9% yield is also reflective of a dividend hike last quarter that went to $0.31 from $0.27 per quarter.

Invesco Ltd. (NYSE: IVZ) has a 1.7% dividend yield.  At $25.51, it trades at about 14-times the Thomson Reuters estimate of $1.81 EPS for fiscal Dec-2011. Invesco’s dividend has been static at $0.11 per quarter for a year now.

Eaton Vance Corp. (NYSE: EV) has a 2.4% dividend yield.  At $31.25, it trades at about 17.8-times the Thomson Reuters consensus estimate of $1.75 EPS for fiscal October-2011.  Eaton Vance raised its dividend to $0.18 from $0.16 just two quarters ago.

There were also higher payouts elsewhere that were irregular and we stuck with companies that have predictable yields rather than fluctuating dividend yields.

If the current landscape remains relatively close today, it seems obvious that higher dividend payments are coming down the road from more asset management firms.  Most of these firms do not need massive growth capital and many have low dividend payout ratios and therefore high dividend coverage ratios.

JON C. OGG