Continuing with its history of enhancing shareholder value through dividend hikes and share repurchases, last week Waddell & Reed Financial Inc. (WDR) announced a 25% hike in its quarterly cash dividend. The new quarterly dividend would be 25 cents per share, payable on February 1, 2012 to shareholders of record as on January 3, 2012. This will place the current annual dividend payable to shareholders at $1.00 per share, which was 80 cents since the last hike.
Prior to this, Waddell & Reed had increased its quarterly dividend in December 2010. At that time, the dividend was raised by 1 cent. Amazingly, even at the height of the financial crisis in 2008, when most of the financial institutions were cutting back their dividends, the company had increased its quarterly dividend by 2 cents to 19 cents.
Furthermore, Waddell & Reed is also actively boosting its shareholders’ wealth through share repurchases from time to time. During the nine-month ended September 30, 2011, the company repurchased 1.7 billion shares worth $57.1 million.
Therefore it can be assertively said that Waddell & Reed is quite consistent about enhancing its shareholders’ value. These activities also reflect the company’s strong financial backbone even throughout the sluggish economic recovery.
Similar to Waddell & Reed, earlier this month, Franklin Resources Inc. (BEN) and Ameriprise Financial Inc. (AMP) increased their respective quarterly dividends. Franklin Resources increased its quarterly common stock dividend by 8% to 27 cents per share payable on December 30 to shareholders of record as on December 19. Also, Ameripriseannounced that it has raised its quarterly cash dividend to 28 cents per share, payable on February 24, 2012 to shareholders of record as on February 10, 2011.
Our Viewpoint
Although we expect Waddell & Reed to maintain its strong growth story with improving asset under management, volatility in the equity markets and significant intangibles on its balance sheet will pull down its profitability. However, we are encouraged to see the competitive ranking of its funds. Further, the company’s decision to boost shareholders value through dividend hike will definitely result in increased investors’ confidence.
Currently, Waddell & Reed retains a Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we are maintaining a long-term Neutral recommendation on the stock.
