Higher dividend yields
BlackRock (BLK) has historically paid out the major portion of its profits in dividends. The company increases its dividend per share in line with its performance. It has approved a 5% increase in its quarterly dividend per share to $2.29.
In 1Q16, BlackRock declared a total dividend per share of $2.29, an increase of 5% compared to the prior year’s quarter. This translates to an annualized dividend yield of 2.6%, which is higher than the industry average of 1.9%. In comparison, BlackRock’s peers have the following yields:
Together, these companies form 1.7% of the SPDR S&P 500 ETF (SPY).
If the company continues to deliver double-digit growth in EPS (earnings per share), it will mean higher dividends per share. BlackRock’s share price will also be supported by above-industry-average dividend yields.
BlackRock has repurchased $1.1 billion worth of its own stock over the past four quarters. In 1Q16, the company’s stock repurchases were worth $300 million. It has consistently reduced its weighted average diluted number of shares to 167.4 million as of March 31, 2016, from 169.7 million on March 31, 2015.
BlackRock reported a decline of 20% in net income to $657 million in 1Q16 from last year’s $822 million. The decline has been steep on higher restructuring charges and cost pressures on ETF offerings.
Over the past six months, BlackRock stock has risen 10% due to higher flows in low-cost ETFs as well as an increase in fixed income sales. BlackRock’s performance has been more resilient in the wake of the new client assets it continues to attract across product offerings. BlackRock’s ownership pattern, dominated by mutual funds, financial institutions, and ETFs, reflects the stability investors see in the stock’s performance.
In the final part of our series, let’s take a look at BlackRock’s valuations in 1Q16.