BlackRock Inc. (BLK) raises dividend 9%, but trades at a premium to the industry.

BlackRock’s (NYSE:BLK) dividend was increased by a solid 9%. Its overall yield is 2.64%. The firm started paying a dividend in 2003.

BlackRock is a publicly owned investment manager. The firm primarily provides its services to institutional, intermediary, and individual investors including corporate, public, union, and industry pension plans, insurance companies, third-party mutual funds, endowments, public institutions, governments, foundations, charities, sovereign wealth funds, corporations, official institutions, and banks. It also provides global risk management and advisory services. The firm manages separate client-focused equity, fixed income, and balanced portfolios. It also launches and manages open-end and closed-end mutual funds, offshore funds, unit trusts, and alternative investment vehicles including structured funds. BlackRock, Inc. was founded in 1988 and is based in New York City with additional offices in Boston, Massachusetts; London, United Kingdom; Brazil; Philadelphia, Pennsylvania; Plainsboro, New Jersey; and San Francisco, California.

BlackRock has maintained a solid three-year growth rate of dividends of 11 percent. BlackRock currently ranks 1st in yield within the financial, investment brokerage – regional category. The quarterly dividend for the March payment will be $2.50 versus the prior year rate of $2.29 per share. BlackRock Inc. is not a member of our Top 100 Dividend Stock List (see below).

The dividend will be paid at the new higher rate on March 23, 2017, to shareholders of record at close of business on March 6, 2017. BlackRock is currently priced at $379.35. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
3/6/2017 2.5
12/8/2016 2.29
8/31/2016 2.29
6/2/2016 2.29
3/3/2016 2.29
12/1/2015 2.18
8/31/2015 2.18
6/5/2015 2.18
3/4/2015 2.18
12/1/2014 1.93
8/28/2014 1.93
6/5/2014 1.93
3/5/2014 1.93
11/29/2013 1.68
8/29/2013 1.68
6/6/2013 1.68
3/5/2013 1.68
11/29/2012 1.5
8/30/2012 1.5
6/5/2012 1.5
3/5/2012 1.5
12/1/2011 1.375
8/31/2011 1.375
6/3/2011 1.375
3/3/2011 1.375
12/1/2010 1
8/31/2010 1
6/3/2010 1
3/4/2010 1


We examine BlackRock upon our five key criteria, which include; 

Quantitative Analysis:

Category Value Score
Dividend Yield 2.64% 187
Dividend Growth (3 to 6 year avg) 13% 158
Forward P/E 16.23  110
S&P Financial Rating AA- 80
Beta 1.20 175
Total Score   710

Additional quantitative information on P/BV ratio and historical yield;

% Yield 3 Year Div. Growth Rate 6 Year Div. Growth Rate BV 2016 P/BV Ratio 10 yr P/BV Low 10 yr P/BV High 5 yr lowest Yield % 5 yr max Yield %
2.64% 11% 15.25% 187.50 2.02 1.3 2.2 2.05% 3.79%

Positives;

  • BlackRock maintains an investment grade credit rating.
  • BlackRock has maintained a three year growth rate of dividends of  11 percent.
  • BlackRock’s dividend yield is above that of the S&P 500 Index.

Negatives;

  • BlackRock’s current dividend yield (2.64%) is below it’s five-year average of 2.92%.
  • BlackRock is trading above its ten-year average price/book value (P/BV) ratio of 1.75.
  • BlackRock maintains a beta of 1.20, higher than the average company.

Latest Earnings & Overall Analysis:

BlackRock issued its last earnings data on January 13th. The company reported $5.14 EPS for the quarter, topping the consensus estimate of $5.02 by $0.12. BlackRock maintains a solid return on equity of 11.2%.  Revenue totaled $2.890 billion. Analysts polled by Reuters expected adjusted earnings per share of $5.02 and revenue of $2.928 billion, thus Blackrock slighly missed expectations.  Total assets under management were up by a solid 10.8% this year. However, total fees collected off those assets rose a scant 0.4%.

Total expenses in the quarter dropped by over 3% while for the quarter net income fell to $851 million in Q4, versus $861 million a year earlier. The firm’s popular iShares exchange-traded funds took in $49 billion in inflows. This was down nearly $10 billion in the year-earlier period.  The firm is now a giant competing with firms like Vanguard and Fidelity. Its total assets of $5.148 trillion make it the largest asset manager in the world.

BlackRock took in $141 billion in investor inflows with its iShares operations during 2016, higher than all other asset managers due to its dominant position in ETFs. BlackRock should continue to grow in the 8-12% range per year on an asset level. According to a new survey released BlackRock recently, over half of US investors plan to invest in exchange traded funds, or ETFs, in 2017.  The survey also demonstrated that millennials (defined as age 21-35) are more inclined to invest in ETFs than the older generations. 70% of millennial investors plan to invest in ETFs in the next 12 months in contrast to half of the rest of investors. And there is substantial room for growth. The global ETF industry accounts for only 4% of the overall equity market and a mere 1% of the overall bond market. Combined these markets are over $3 trillion dollars worldwide. As the the future, analyst estimates for earnings per share are about $21.92 for next year. The firm has approximately $5.62 billion in cash and nearly $5 billion in total debt.

Overall, Blackrock is a solid firm and a leader in the asset management industry. However, it trades at a 30% premium to other asset management firms like T. Rowe Price and Franklin Resources. Its ETF business is growing fast, but the scant profits on these ETFs make the firm’s revenue growth quite low. Based on the firm’s lower than average dividend yield, premium industry P/E, and high beta, BlackRock does not qualify as a member of our  Top 100 Dividend Stocks

BlackRock Inc. Dividend Yield Chart (Click to enlarge)

blk3

Chart Explanation:  Dividend growth stocks may be viewed favorably when the current yield is above historical readings for the past 5 years.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s