We recently published a list of Dividend Achievers List: Top 15. In this article, we are going to take a look at where Franklin Resources, Inc. (NYSE:BEN) stands against other dividend achievers.
Dividend investing has become increasingly popular over time, as generating regular income remains a key focus for investors. Companies that consistently raise their dividends are particularly appealing, offering not just earnings but the potential for increasing income. Investors typically look for a minimum of 10 years of dividend growth, which is where “dividend achievers” come in. These are companies that have raised their dividends for at least 10 consecutive years.
Dividends play an important role in the overall returns. Over the past 25 years, nearly half of the total return from U.S. equities has come from reinvested dividends and the power of compounding. The broader market achieved an average annual total return of 7.4% during this period, with 55% coming from price gains and 45% from reinvested dividends, as reported by Bloomberg.
Dividend growth stocks have consistently delivered solid returns over time. The Dividend Aristocrats Index, which tracks companies that have increased their dividends for at least 25 consecutive years, has performed well historically. In a January 2019 blog post titled “Exploring Dividend Growth Strategies for Market Downturns,” Phillip Brzenk, S&P’s global head of multi-asset indexes, examined the performance of dividend growth strategies, particularly during market downturns. It was noted that the dividend aristocrats index outperformed the market in 53% of cases, with an average outperformance of 0.16%. In declining markets, the aristocrats outperformed over 70% of the time, with an average gain of 1.13%. However, in rising markets, they underperformed 56% of the time, though the average underperformance was smaller, at -0.34%. This suggests that the dividend aristocrats provided downside protection during months when the broader market experienced losses.
Dividend growers can also help protect against inflation. As rising prices erode investors’ wealth, companies that consistently increase their dividends offer a way to counteract this. While interest rates may seem appealing today, they might not hold the same value in the future. On the other hand, investing in companies with strong business models, assets, and strategies that support long-term dividend growth is often more attractive than opting for short-term, higher-yield investments. A report by Abrdn PLC also highlighted that, over the past 20 years, companies that began paying dividends or consistently increased them outperformed the global index. These dividend growers and initiators also outshined companies that paid dividends without increasing them, as well as those that didn’t pay dividends at all. In addition, the report noted that dividend-growing companies experienced lower volatility and delivered better risk-adjusted returns during this period.
That said, high-yield dividend stocks aren’t necessarily a poor choice. Analysts suggest seeking yields in the 3% to 6% range. According to Nuveen, stocks that pay dividends and also show steady dividend growth can be a sign of quality, as they demonstrate a company’s ability to balance dividend payouts while reinvesting capital to support future growth. With this, we will discuss the dividend achievers’ list.
Our Methodology:
For this list, we looked at a group of dividend achievers, which are known for raising dividends for 10 years or more. From this list, we chose companies with the highest dividend yields as of September 22 and arranged them in order from lowest to highest yield.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of an investor making a transaction, with a financial graph reflecting the market trend.
Franklin Resources, Inc. (NYSE:BEN)
Dividend Yield as of September 22: 5.96%
Franklin Resources, Inc. (NYSE:BEN) is an American multinational asset management company, headquartered in California. The company offers a wide range of investment solutions and services. The company reported preliminary assets under management of $1.68 trillion as of August 31, 2024, marking a 1.1% increase from $1.66 trillion on July 31, 2024. The monthly growth was primarily attributed to favorable market conditions, although it was somewhat tempered by long-term net outflows.
In fiscal Q3 2024, Franklin Resources, Inc. (NYSE:BEN) reported revenue of $2.1 billion, which fell by 1% on a YoY basis. However, the company’s operating income of $222.5 million jumped significantly by 72% from the same period last year. Its cash position was also strong with $6.8 billion available in total cash and investments at the end of the quarter. The company significantly benefits from its acquisitions, gaining cost efficiencies and expanding its customer base through these strategic actions. The January acquisition of Putnam Investments, in particular, enhanced the company’s investment capabilities, which has been reflected in strong investment performance.
Franklin Resources, Inc. (NYSE:BEN) is a Dividend Achiever with 48 years of consistent dividend growth. The company has been distributing millions to shareholders every quarter. Its trailing twelve-month dividend amount jumped $656 million in the most recent quarter, from $610 million in the same period last year. In fiscal Q3 2024, the company returned $168 million to shareholders through dividends. It currently offers a quarterly dividend of $0.31 per share and has a dividend yield of 5.96%, as of September 22.
At the end of the second quarter of 2024, 27 hedge funds in Insider Monkey’s database owned stakes in Franklin Resources, Inc. (NYSE:BEN), compared with 31 in the previous quarter. These stakes have a collective value of $323 million.
Overall, BEN ranks 3rd on our list of Dividend Achievers. While we acknowledge the potential of BEN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BEN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
