Broadridge: Finance Meets Technology

06/14/2017 2:56 am EST


Chloe Jensen

Chief Analyst, Cabot Dividend Investor

Though it has the word “financial” in its name, Broadridge Financial Solutions (BR) is actually a tech company, providing solutions for the financial industry, observes income expert Chloe Lutts Jensen, editor of the Cabot Dividend Investor.

The company offers a wide variety of tools that financial professionals use for everything from securities analysis to expense management; it also provides investor communication solutions, like distributing quarterly reports, processing proxy votes and hosting annual meetings.

Broadridge is constantly investing in new technologies, which both attracts new customers and consistently increases revenue-per-customer.

The company delivers consistent EPS growth, averaging 26% per year over the past five years. Management has focused on growing recurring revenues in recent years, largely through acquisitions, to improve the stability of earnings even further.

Broadridge beat estimates by 15% in its latest earnings report, and four analysts have increased their estimates in the past month. Analysts expect the company to deliver 15% EPS growth this year and 16% growth next year.

Sales are expected to rise 41% this year (thanks to a major acquisition—organic sales growth will likely be in the high single digits) and 6% next year. (The company’s fiscal year ends in June, so Broadridge is currently in the last quarter of fiscal 2017.)

Broadridge makes paying “a meaningful dividend” a high priority, and aims for a dividend payout ratio of at least 45% (based on prior year net earnings). Currently, the stock yields 1.8%.

It has paid dividends consistently since its IPO in 2007, and has increased the dividend for nine years running. Over the past five years, the dividend increases have averaged 16% per year.

After consolidating for most of 2015, BR began a strong rally in January 2016, advancing from $50 to $71 with only minor pullbacks. But the stock ran into resistance in September, and the ensuing correction brought it briefly back down to $60.

BR bottomed in November 2016, had returned to $70 by March of this year, and then began a 10-week consolidation. It then broke out to a new all-time high earlier this month, after May 10’s stellar earnings report.

Since then, the stock’s progress has been nearly straight up, and it’s just now pausing for a quick breather around $75. All signs point to more gains ahead for BR, and we’ll add the stock our Dividend Growth portfolio; investors seeking growth and dividends can do the same.

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