Today’s video features an EPIC dividend stock: Franklin Resources (BEN). This Dividend Aristocrat is tumbling in 2022 and the company’s dividend yield is now soaring. In fact, their yield is above 5%!  In this article, we review what has transpired this year and run the company through our dividend stock screener. Are we buying Franklin Resources. Continue reading to find out!

Why I Invest in Dividend Stocks

I invest in dividend stocks to grow a my passive income. One day, my dividend income will be large enough to cover my monthly expenses. That is why we are relentlessly searching for undervalued dividend stocks to buy. To put our hard earned cash to work.

We save a high percentage of our income each month, to help fuel our dividend stock portfolio. Having a high savings rate is a key pillar of our strategy and helps fuel the fire and push the snowball further down hill.

While we are waiting to invest our money in the market, it is earning a high interest rate in accounts such as Yotta (1% – 2% APY, on average) or SoFi (Earning 1.25%). If you are looking to earn more on your cash, it is definitely worth checking those products out!

Read: How to Earn More on Your Savings Account – What I’m Doing Today!

Building a dividend income stream takes time, consistency, hard work, saving, and most importantly, investing. I have been investing in dividend growth stocks since 2012. Saving a high percentage of my dividend income allows me to invest as much as possible, so we can retire as soon as possible.

Slowly, but steadily, my income has grown. Brick by brick. DRIP by DRIP. It is really exciting to see the growth and larger dividend checks trickle into my brokerage account.

That’s why we are always looking for undervalued stocks to buy using our stock screener. You can’t ever own too many undervalued dividend stocks, right?!

Franklin Resources – A Tough 2022

Franklin Resources (BEN) is popping up on our radar for an obvious reason. It is not exactly off to a strong start in 2022. In fact, that may be an understatement. Currently, Franklin Resources is down over 30% Year to Date (YTD). That’s right, it is getting hammered in the first half of the year.

The primary driver in the decline in stock price is the lower assets under management (AUM) and lower asset values. Franklin Resources earns income from customers based on investment activity and asset management fees. Lower AUM. Lower Fees. Pretty simple, right?!

The company’s declining AUM trend continued in May. Per reports, AUM decreased from $1.46T to $1.45T during the last month (Source: Seeking Alpha). Interestingly, even with an increased in the market values of investments in May (somehow), the company’s net cash outflows were larger that the increased value. This is a similar trend to T.Rowe Price (TROW). In tough times, investors will put their cash on the sidelines (although we love to buy the dip).

Is all lost for Franklin Resources? Absolutely not. The company still has a legenday brand, Franklin Templeton Funds, and nearly a trillion and a half dollars worth of assets under management. This isn’t some asset management company spun up in your parents’ garage. This is Franklin Templeton! The growth isn’t stopping there. The company announced an acquisition of BNY Mellon’s Alcentra Group. This acquisition will add another $38 billion of AUM to the company’s portfolio.

Dividend Diplomats Dividend Stock Screener

Time to run through the Dividend Diplomats Dividend Stock Screener. We use 3 SIMPLE metrics to evaluate every dividend stock. The goal of our stock screener is to identify if a stock is an undervalued dividend growth stock to buy.

Watch: Our Simple, 3 Step Stock Screener

Here is a rundown of the 3 metrics of our stock screener:

1.) Price to Earnings Ratio Less than the S&P 500. Currently, the S&P 500 is trading at a P/E Ratio of 18.88X. This continues to slide from the mid 20s range that we saw just a few months ago.

2.) Dividend Payout Ratio Less than 60% (Although we think a perfect payout ratio is 40% – 60%). The payout ratio measures the safety of the dividend. This ensures the company can continue growing its dividend during good times and bad. That’s why it is a critical metric in our stock screener that we must evaluate!

Read: Dividend Aristocrats with a PERFECT Dividend Payout Ratio

3.) History of Increasing Dividends. We review this metric by reviewing the company’s five-year average dividend growth rate and consecutive annual dividend increases. Since we are long term investors, it is important that a company increases its dividend consistently!

Bonus: Dividend Yield. We like to also throw in a bonus metric to our dividend stock analysis. Yield does not drive our decision; however, we would be lying if we said we completely ignore dividend yield.

How Does Franklin Resources (BEN) Perform in Our Stock Screener?

For this analysis, we will use Intel’s stock price $23.08 (June 15, 2022 close). Analysts are projecting forward EPS of $3.68 per share. The company’s annual dividend is $1.16 per share. Now that we have the inputs for our analysis, let’s dive into the results.

1.) Price to Earnings Ratio: 6.27x.

2.) Dividend Payout Ratio: 31.5%%. 

3.) History of Increasing Dividends:  Franklin Resources is a Dividend Aristocrat. Clearly, they have a long term track record of increasing their dividend in good times and bad. The company’s 5 year average dividend growth rate is 8.45%.

4.) Dividend Yield: 5.03%

Summary

Franklin Resources is rapidly climbing up my dividend stock watch list. The company aced our dividend stock screener, crushing all 3 metrics. Plus, the company’s dividend yield is over 5%. What a cherry on top for this dividend stock analysis.

Currently, my wife and I own shares of T.Rowe Price (TROW). Therefore, it would be nice to compliment our asset management positions with a company like Franklin Resources. Let’s see where the market lands and if I pick up shares in the coming weeks!

What do you think of Franklin Resources? Are you buying at these levels? Or do you prefer T.Rowe Price or a different sector? What are your current top stocks on your dividend stock wathc list?

Bert