Higher dividend yields
BlackRock (BLK) has historically paid out the major portion of its profits in dividends. It increased the dividend per share in line with the company’s performance.
In fiscal year 2014, BlackRock declared a total dividend of $7.72. The company has a dividend yield of 2.2%, which is higher than the industry average of 1.9%. If the company continues to deliver double-digit growth in EPS, that will translate into more dividends per share. BlackRock’s share price will also be supported by above industry average dividend yields.
Growth and retirement option
BlackRock reported an increase in net income of 12% to $3.29 billion compared to $2.93 billion in the last year. Considering the double-digit EPS growth due to increased focus on iShares and Retail clientele, the stock can continue to trade at around 19x price to earnings. This will result in 7%–10% appreciation in the stock and 2%–3% dividend yield.
The ownership pattern dominated by mutual funds, financial institutions, and ETFs also reflects the stability investors see in the stock performance.
BlackRock fares well in terms of the past year’s stock appreciation and dividend yield. It did better than State Street (STT), Morgan Stanley (MS), and Franklin Resources (BEN), which together make up 3.69% of the Financial Select Sector SPDR Fund (XLF).
BlackRock generated total returns, including stock appreciation and dividend yield, of about 11.03% over the last year compared to State Street’s 5.36% and Morgan Stanley’s 4.71%.