BlackRock Boosts Shareholder Value - Analyst Blog
February 27 2012 - 7:15AM
Zacks
Last week, BlackRock Inc. (BLK) announced a 9%
increase in its quarterly cash dividend to $1.50 per share. The
dividend will be paid on March 23, 2012 to the stockholders of
record as of March 7, 2012.
BlackRock has been consistent in enhancing shareholder value
through dividend hikes. Since 2005, the company has increased its
quarterly dividend by nearly 500% from 30 cents per to the current
level.
Last year, BlackRock had increased its quarterly cash dividend
from $1.00 per share to $1.375. Even during the financial crisis in
2008, the company confirmed its strong financial backbone by paying
78 cents as quarterly dividend for two years.
Concurrent with the dividend rise, BlackRock’s board of
directors has also authorized the repurchase of additional 1.4
million shares from the open market. There were 3.6 million shares
left under the prior authorization as of December 31, 2011, thereby
bringing the total share repurchase authorization to 5.0 million.
During 2011, the company had repurchased about 14.2 million
shares.
Similar to BlackRock, one of the industry participants –
Ameriprise Financial Inc. (AMP) is also doing well
with respect to enhancing shareholder value through dividend hikes.
Ameriprise has been successfully increasing its dividend at regular
intervals. Since 2005, it has also hiked its quarterly dividend by
about 150% from 11 cents per share to the present 28 cents.
Our Viewpoint on Dividend Rise
Increasing dividend payment at regular intervals mainly reflects
the company’s sound financial position, defined future prospects
and the company’s commitment towards its shareholders.
Though dividend rise is an extremely encouraging step, we cannot
neglect the other aspects before becoming optimistic on BlackRock.
Two things that should be taken into consideration are the dividend
yield (annual dividend per share/stock’s price per share) and the
dividend payout ratio (annual dividend per share/annual earnings
per share).
BlackRock previously had a dividend yield of 2.80%. With
dividend increasing to $1.50, the dividend yield increased to
3.04%. As the company’s share price has remained almost stable over
the last 90 days, yield did not increase due to price rise, leading
to the conclusion that the shareholders will actually be benefited
from a dividend hike.
On the other hand, BlackRock’s payout ratio was nearly 50% when
its previous annual dividend was $5.50. For fiscal 2012,
considering the Zacks Consensus Estimate of $13.16 per share and
the increased dividend, the payout ratio is expected to be about
46%. An almost stable payout ratio signifies improved shareholder
value.
Therefore, we believe that this dividend rise will definitely
increase the confidence level of the BlackRock shareholders.
BlackRock currently retains a Zacks # 3 Rank, which translates
into a short-term ‘Hold’ rating.
AMERIPRISE FINL (AMP): Free Stock Analysis Report
BLACKROCK INC (BLK): Free Stock Analysis Report
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