Investing in This Investment Provider Has Reaped Big Dividends

Investors have always been interested in stocks that pay dividends, but lately, low interest rates on bonds and other fixed-income investments have made solid dividend payers even more valuable. Among the most promising dividend stocks in the market is Franklin Resources , and one big reason is that it is one of the few exclusive companies to make the list of Dividend Aristocrats. In order to become a member of this elite group, a company must have raised its dividend payouts to shareholders every single year for at least a quarter-century. Only a few dozen stocks manage to make the cut, and those that do tend to stay there for a long time.

Franklin Resources is the company behind the Franklin Templeton group of mutual funds, closed-end funds, and hedge funds, with almost $850 billion in assets under management as of the end of April. Although it has sought to help investors reap strong returns through the funds it offers, the company's stock has also been a strong investment in its own right. Let's take a closer look at Franklin Resources to see whether it can sustain its long streak of rewarding dividend payouts to investors.

Dividend Stats on Franklin Resources

Current Quarterly Dividend per Share

$0.29

Current Yield

0.7%*

Number of Consecutive Years With Dividend Increases

32 years

Payout Ratio

11%

Last Increase

December 2012


Source: Yahoo! Finance. Last increase refers to ex-dividend date. *Excludes special dividends.

What's happened with Franklin Resources lately?
Franklin Resources' dividend yield looks puny, but part of the reason comes simply from the stock's impressive run-up recently. With the stock having soared 70% in the past year to reach new all-time record highs, the yield has plunged from above the 1% level to its current low.

Much of that performance comes from Franklin's having been in the right place at the right time. The company's Franklin line of funds is best known for its bond exposure, and the bond market has performed extremely well lately. By contrast, the more stock-focused Janus Capital Group has struggled with weak share prices, as mainstream investors have been reluctant to get back into the stock market and thereby drive growth in assets.

But Franklin is also under threat from the exchange-traded fund arena. Growth in ETFs has exploded in recent years, as BlackRock has come to dominate the ETF space with its massive index-oriented fund offerings. In response, Franklin has sought and received SEC approval to run actively managed ETFs, although so far, the company hasn't actually had an active ETF start trading. Competitors Fidelity and T. Rowe Price have received SEC permission as well for active ETFs, and so it'll be important for Franklin to coordinate its eventual launch to maximize its impression in the space.

BEN Dividend Chart

Franklin Resources dividend data by YCharts.

As you can see, Franklin makes up for its puny regular dividend by making special dividends from time to time. With special dividends of $3 per share late last year and $2 in 2011, Franklin continued its history of supplementing its payout on a fairly regular basis. Given the token increases in regular dividends that Franklin has made in recent years, investors will demand supplemental special dividends in order to keep their overall income high.

When will Franklin Resources raise its dividends again?
Franklin Resources just raised its regular dividend in December, so you shouldn't expect an increase until later this year. The bigger question will be whether Franklin comes through with another special dividend. Given its strong earnings, the company certainly has the capacity to do so, but only time will tell whether corporate management decides to share Franklin's wealth with its shareholders.

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The article Investing in This Investment Provider Has Reaped Big Dividends originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends BlackRock. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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