Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Franklin Resources, Inc. (NYSE:BEN) is set to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company’s record date, which is the date the company determines which shareholders are entitled to receive a dividend. It is important to know the ex-dividend date, because any trade in the stock must have settled on or before the record date. So you can buy shares of Franklin Resources before June 29 in order to receive the dividend, which the company will pay on July 15.
The company’s next dividend payment will be $0.29 per share. Last year, in total, the company distributed US$1.16 to shareholders. Looking at the last 12 months of distributions, Franklin Resources has a yield of around 4.6% on its current price of $25.34. Dividends contribute greatly to investment returns for long-term holders, but only if the dividend continues to be paid. We need to see if the dividend is covered by earnings and if it increases.
See our latest analysis for Franklin Resources
Dividends are usually paid out of company earnings, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. Franklin Resources paid out a comfortable 31% of its profits last year.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend tends to be.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it is easier to increase the dividend when earnings increase. Investors love dividends, so if earnings fall and the dividend is cut, expect a stock to sell heavily at the same time. That’s why it’s a relief to see Franklin Resources’ earnings per share growing 4.4% a year over the past five years.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past 10 years, Franklin Resources has increased its dividend by about 13% per year on average. We are pleased to see dividends increasing alongside earnings over several years, which may be a sign that the company intends to share the growth with shareholders.
Should investors buy Franklin Resources for the upcoming dividend? It has increased its earnings per share somewhat in recent years, although it reinvests more than half of its profits in the business, which could suggest that some growth projects have not yet come to fruition. Franklin Resources ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of more attention.
With this in mind, an essential part of thorough stock research is to be aware of all the risks stocks currently face. To help you, we found 2 warning signs for Franklin Resources (1 is a little nasty!) that you should be aware of before buying the shares.
A common investment mistake is to buy the first good stock you see. Here you can find a complete list of high yielding dividend stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.