BROADRIDGE FINANCIAL SOLUTIONS INC. $100(New York symbol BR; High-Growth Dividend Payer Portfolio, Finance sector; Shares o/s: 115.7 million; Market cap: $11.6 billion; Dividend yield: 1.9%; Dividend Sustainability Rating: Above Average; www.broadridge.com) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing.
Broadridge last raised its quarterly dividend with the October 2018 payment. Investors now receive $0.485 a share, up 32.9% from $0.365. The new annual rate of $1.94 yields 1.9%.
Since 2016, the company has made 13 acquisitions. Some have added to its product offerings. Others have helped keep it at the forefront of the industry’s rapid technological change.
Most recently, Broadridge acquired specific private fund regulatory capabilities from PivotData LLC, a provider of compliance reporting solutions for the investment community, and its partner SOL Hedge LLC. Although the company has yet to reveal the price, the deal helps Broadridge’s clients meet the increasingly tricky reporting requirements for regulators.
The new technologies will help the company with its plan to digitize its back-office processing. That will cut costly paper use and speed up transactions. It will also be better able to update its software and procedures, and so more quickly adapt to changing regulatory requirements.
For the fiscal 2019 second quarter, ended December 31, 2018, Broadridge’s revenue declined 5.9%, to $953.4 million from $1.0 billion a year earlier. It earned $67.2 million, or $0.56 a share, down 29.0% from $94.7 million, or $0.79.
The company expects 2019 capital expenditures of between $95 million and $115 million. Free cash flow (regular cash flow less capital expenditures) should range from $565 million to $615 million. That’s more than enough to cover its annual dividend payments of $225 million.
The stock trades at a high 21.5 times the fiscal 2019 earnings estimate of $4.66 a share. However, that’s acceptable given the company’s strong growth prospects.
Broadridge is a buy.
T. ROWE PRICE GROUP INC. $98(Nasdaq symbol TROW; High-Growth Dividend Payer Portfolio, Finance sector; Shares outstanding: 236.3 million; Market cap: $23.2 billion; Dividend yield: 3.1%; Dividend Sustainability Rating: Highest; www.troweprice.com) sells mutual funds and wealth management services.
With the March 2019 payment, the company will raise its quarterly dividend by 8.6%, to $0.76 a share from $0.70. The new annual rate of $3.04 yields 3.1%.
T. Rowe Price has now increased its dividend each year for the past 33 years.
Its fee income rises and falls with the value of the mutual funds and other securities it manages.
As of December 31, 2018, the company had $1.01 trillion in average assets under management (AUM). That’s up 3.6% from a year earlier. The gain is due to increased asset inflows across all of its distribution channels and in all regions.
In the quarter ended December 31, 2018, revenue rose 0.6%, to $1.31 billion from $1.30 billion a year earlier. Earnings before unusual items rose slightly, to $384.0 million from $383.9 million. Due to fewer shares outstanding, per-share earnings gained 1.3%, to $1.54 from $1.52.
The stock trades at 15.6 times the 2019 earnings estimate of $6.29 a share. In addition, the company has added 10 million shares to its repurchase authorization, bringing the total to about 22.4 million shares (or roughly 10% of the total outstanding). There are no time limits for those purchases.
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