BlackRock Offers Investors 5.4% Quarterly Dividend Hike (BLK)
By: Ned Piplovic,
BlackRock, Inc. (NYSE:BLK) continued its streak of rising dividend payouts and rewarded its investors with a 5.4% quarterly dividend hike for the next round of dividend distributions in the first week of March.
Unlike the company’s share price — which lost some of its value in 2018 but is mounting a strong comeback in 2019 — BlackRock extended its streak of annual dividend increases to a full decade with the most recent quarterly dividend hike. Additionally, the share price pullback advanced the dividend yield to 3%, which is in line with the average yield of BlackRock’s industry peers and above BlackRock’s own five-year yield average.
In addition to a decade of consecutive annual dividend boosts, the company failed to deliver a dividend hike to its shareholders only once since its first dividend distribution in 2003. The company’s current dividend payout ratio of 35% is also well within the 30% to 50% range considered by most investors as sustainable.
The low payout ratio indicates that the current dividend distributions are well-covered by the company’s earnings. Because BlackRock distributes just a little more than one-third of its earnings as dividends, the company should be able to continue its streak of delivering at least one quarterly dividend hike per year in the foreseeable future. BlackRock’s current 35% dividend payout ratio is also lower than the company’s 40% average ratio over the past five years. This is another indication that the dividend payouts should continue with minimal uncertainty.
The steadily rising dividend income and the share price pullback last year might be an opportunity for income-seeking investors to consider adding BLK to their investment portfolio. These investors should conduct their due diligence to make sure that BlackRock’s financials and future outlook align with their investment strategy and long-term goals. Those investors that decide to take a long position in the BlackRock stock should act before the upcoming ex-dividend date on March 5, 2019. All investors that can claim stock ownership prior to that ex-dividend date will be eligible to receive the next round of dividend distributions on the March 21 pay date.
BlackRock, Inc. (NYSE:BLK)
Based in New York City and founded in 1988, BlackRock, Inc. is a publicly owned investment management company. The firm primarily provides its services to institutional, intermediary and individual investors including pension plans, insurance companies, third-party mutual funds, endowments, public institutions, governments, foundations, charities and banks. Additionally, the company provides global risk management and advisory services. In addition to its head office in Manhattan, the company operates approximately 70 additional offices in 30 countries
The company’s upcoming $3.30 quarterly dividend amount reflects a 5.4% quarterly dividend hike over the $3.13 payout amount from the previous period. This current quarterly dividend payout corresponds to a $13.20 total annualized dividend amount and a 3% forward dividend yield. Aided by the share price pullback, the current 3% dividend yield is 28% higher than the company’s own 2.4% average yield over the past five years.
This increase brought BLK’s current yield closer in line with the 3.17% average yield of the entire Financials sector, as well as the 3.24% simple average yield of BlackRock’s peers in the Regional Investment Brokerage industry segment.
The company’s only missed dividend hike in 2009 broke the streak of consecutive annual hikes since dividend introduction in 2003. However, that outcome was still better than what many of BlackRock’s peers experienced at the time. Many companies were forced to cut or outright eliminate dividend distributions in the aftermath of the 2008 financial crisis. Yet, Blackrock managed to pay the same $3.12 annual dividend in 2009 that it did in the prior year and started a new streak of consecutive annual dividend hikes in 2010.
Since resuming the annual dividend hikes in 2010, the company has enhanced its total annual dividend payout amount more than four-fold. That level of advancement corresponds to an average growth rate of 15.5% per year. Even with one missed dividend hike in the past 16 years, the company still increased its total annual dividend more since 2003, which is equivalent to an average annual growth rate of more than 19%.
BlackRock’s rising dividend distributions managed to offset some of the share price decline and limited the total loss over the past 12 months to approximately 17%. However, BLK rewarded investors who took a long position five years ago with a total return of nearly 63%.
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