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Franklin Resources (BEN) is a Top Dividend Stock Right Now: Should You Buy?

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Franklin Resources in Focus

Headquartered in San Mateo, Franklin Resources (BEN) is a Finance stock that has seen a price change of 17.73% so far this year. The investment manager is paying out a dividend of $0.28 per share at the moment, with a dividend yield of 3.81% compared to the Financial - Investment Management industry's yield of 1.67% and the S&P 500's yield of 1.25%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.12 is up 3.7% from last year. In the past five-year period, Franklin Resources has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.19%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Franklin Resources's current payout ratio is 42%, meaning it paid out 42% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, BEN expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $3.02 per share, which represents a year-over-year growth rate of 15.71%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, BEN is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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