Broadridge Financial Solutions (BR) provides investor communications services and technology-related solutions to the financial services industries, notes Ben Reynolds, editor of Sure Passive Income Newsletter.
Broadridge was spun off from Automatic Data Processing (ADP) in 2007, where it had been the brokerage service division of the that company since 1962. The company serves clients around the world, but has the majority of its customers in the U.S., Canada, and the U.K. The company generates annual revenue approaching $6 billion.
Broadridge reported fourth-quarter and fiscal year 2022 results on August 12th, 2022. Revenue grew 12% to $1.7 billion while adjusted earnings-per-share of $2.65 was up 21% from the prior year. For the fiscal year, revenue improved 14% to $5.7 billion while adjusted earnings-per-share increased 14% to $6.46.
For the quarter, recurring fee revenue improved 15% to $1.19 billion and accounted for 69% of total revenue. For fiscal year 2023, leadership projects 7.5% growth for recurring revenue, a 19.2% adjusted operating income margin, and 7% to 11% growth in adjusted earnings-per-share.
Broadridge became an independent publicly traded company just as the Great Recession was beginning. Still, the company performed fairly well during the period.
Broadridge’s earnings-per-share for the 2007 through 2010 period were $1.42, $1.36, $1.58, and $1.62. After a decline in fiscal year 2008, the company established a new high for earnings-per-share in fiscal year 2009. Results were mixed following the period but have largely been in an uptrend over the last decade.
The company has increased its dividend for the past 16 years and yields 2.0% today. Broadridge has a projected payout ratio of 41%, so the company has additional room to continue to raise its dividend going forward.
Broadridge processes millions of trades per day involving trillions of dollars and provides investor communications which reach three-quarters of North American households. The company also manages shareholder voting in close to 120 countries. This provides the company with a size and scale that few, if any, competitors can match.
Broadridge also benefits from having the bulk of its revenue come from recurring fees. This has helped to smooth out results over the long-term.
Additionally, the company should benefit from the trends of increased digitization, mutualization, and the democratization of investing. As more people around the world enter the middle class, the more there will be a need for access to investing. This gives Broadridge, which already has a dominating position in its business, further growth opportunities.
We forecast earnings-per-share growth of 9% per year for the next five years, which happens to be the midpoint of the company’s guidance for the current fiscal year. This growth rate should be supported by continued marketplace dominance in its industry as well as ongoing gains in recurring fee revenue.