We recently compiled a list of the Dividend Aristocrats: Top 7 Companies by Yield for November 2024. In this article, we are going to take a look at where Franklin Resources, Inc. (NYSE:BEN) stands against the other dividend aristocrats.
When it comes to investing in stocks, investors are always on the lookout for companies that can deliver steady income. That’s why dividend stocks have always been a favorite. Among these, companies with the ability to grow their dividends consistently tend to be the ones that come out on top. Dividend aristocrats are companies that have consistently increased their dividends for 25 years or more. Achieving this is no small accomplishment. Paying regular dividends can be challenging for many companies, let alone raising them for over two decades.
Dividend aristocrats have delivered strong returns, outperforming other asset classes. According to a report by S&P Dow Jones Indices, from the index’s launch in 2005 through September 2023, the dividend aristocrats index achieved a total return of 10.35%, surpassing the broader market’s 9.54% return over the same period. These stocks are praised for not only their consistent dividend growth and steady equity gains but also their lower volatility. Over this time, dividend aristocrats experienced a volatility rate of 15.35%, compared to the market’s slightly higher 16.31%. This suggests that dividend aristocrats generally exhibit more stable price movements. Their long history of increasing dividends for 25 years or more shows their ability to reward shareholders even during challenging times, such as the 2007 financial crisis and the 2020 pandemic.
A report from Thornburg Investment Management compares the income generated from a hypothetical $1 million investment in the Bloomberg US Aggregate Bond Index versus the Dividend Aristocrats Index from 1990 to 2023. The findings showed that the income from the $1 million investment in the Bloomberg US Aggregate Bond Index decreased from around $90,000 annually in 1990 to just under $37,000 in 2023. In contrast, the income from the Dividend Aristocrats Index grew significantly, rising from about $30,000 in 1990 to more than $400,000 in 2023. The report also highlighted that dividend aristocrats outperformed the market in four of the six five-year periods between 1990 and 2023. This consistent outperformance, coupled with more stable returns, demonstrates the index’s ability to deliver strong results over time.
Also read: 10 Best Dividend Aristocrat Stocks To Buy Right Now
The debate between high yields and dividend growth remains ongoing. Many investors believe that high yields are not necessarily risky. Achieving 25 consecutive years of dividend growth doesn’t require sacrificing yield. According to a report by S&P Dow Jones Indices, Dividend Aristocrats have consistently provided higher yields than the broader market, typically ranging from 2.0% to 2.9% over the 26-year period from 1998 to 2022.
Some studies have emphasized the long-term advantages of high-yield stocks, noting that as dividend yields rise, both returns tend to improve and risk decreases. Hartford Funds recently conducted an in-depth analysis of this, considering annualized standard deviation, which measures the volatility of a portfolio’s returns. A higher standard deviation indicates greater historical volatility. According to the findings, from December 1969 to March 2024, high-dividend portfolios produced an annualized return of 12.3%, mid-dividend portfolios returned 10.5%, and low-dividend portfolios earned 9.7%. The annualized standard deviations for these portfolios were 14.1%, 16%, and 20.8%, respectively.
Our Methodology:
For this list, we looked at a group of 67 dividend aristocrat companies, which are known for raising dividends for 25 years or more. From this list, we chose 7 stocks with the highest dividend yields as of November 26 and arranged them in order from lowest to highest yield. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 900 as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of an investor making a transaction, with a financial graph reflecting the market trend.
Franklin Resources, Inc. (NYSE:BEN)
Dividend Yield as of November 26: 5.46%
Franklin Resources, Inc. (NYSE:BEN) ranks second on our list of the best dividend aristocrat stocks. The American multinational asset management company offers a wide range of related services and products to shareholders. The stock has dropped more than 27% since the beginning of 2024, which isn’t entirely unexpected given its inconsistent past performance. However, the company has evolved significantly over time. Through strategic acquisitions, such as last year’s purchase of the options-trading technology firm volScout, this mutual fund leader is now better positioned to meet the growing demands of both individual and institutional investors.
In the fourth quarter of 2024, Franklin Resources, Inc. (NYSE:BEN) reported revenue of $2.21 billion, which showed an 11.3% growth from the same period last year. The company achieved a record in assets under management (AUM), reaching $1.68 trillion, and experienced a 25% increase in long-term inflows, totaling $319 billion compared to the previous year. However, long-term net outflows amounted to $32.6 billion, which included $20.7 billion in reinvested distributions.
Franklin Resources, Inc. (NYSE:BEN) currently offers a quarterly dividend of $0.31 per share. The company has always remained committed to its shareholder obligation, as it returned $946 million to investors through dividends and share repurchases in the most recent quarter. Moreover, it has been growing its dividends consistently for the past 48 years. With a dividend yield of 5.46% as of November 26, BEN is one of the best dividend aristocrat stocks on our list.
As of the close of Q3 2024, 26 hedge funds tracked by Insider Monkey held stakes in Franklin Resources, Inc. (NYSE:BEN), compared with 27 in the preceding quarter. These stakes have a collective value of over $272.6 million. Cliff Asness, Israel Englander, and Paul Tudor Jones were some of the company’s most prominent stakeholders in Q3.
Overall BEN ranks 2nd on our list of the best dividend aristocrat stocks to buy. While we acknowledge the potential for BEN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BEN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.