Franklin Resources: One Of The Riskiest Dividend Aristocrats

Seeking AlphaFranklin Resources: One Of The Riskiest Dividend AristocratsSep. 11, 2020 10:35 AM ET|| About: Franklin Resources, Inc. (BEN), Includes: IVZ, WDRby: Ian BezekIan Bezek Ian's Insider CornerResearch and trade alerts from a hedge fund pro with a global outlook.SummaryMutual fund manager Franklin Resources currently offers a 5% dividend yield, making it one of the highest paying Dividend Aristocrats around.
However, there's no free lunch here. Investors have to buy a declining business to get that elevated yield.
Given how quickly Franklin's earnings and margins are sinking in a bull market, the forward outlook is poor.
Most investors should avoid Franklin Resources stock, in my opinion.
The stock market was been making record highs recently despite a volatile economic environment. That combination has left many value-seeking investors confused: What's left to buy at a fair price at this point?
If you use stock screeners, there's a good chance that asset managers are showing up as some of the most desirable cheap stocks left. I know - I've followed the space for awhile. I originally bought into fund manager Waddell & Reed (WDR) when it was seemingly cheap and paid an 8% dividend yield. Unfortunately earnings declined and the dividend was cut; I sold for a modest loss.
Similarly, this spring, Invesco (IVZ) popped up on a lot of people's radars as a cheap oversold stock with a high dividend yield. Unfortunately, when I looked at it, the dividend seemed at risk and the company's trajectory was poor. That concern was justified, as Invesco slashed its dividend later that spring.
This brings us to today's topic, Franklin Resources (BEN), which is more commonly known as Franklin Templeton. In addition to that well-known fund management franchise, Franklin also recently merged with Legg Mason, bringing another well-known brand under their umbrella.
And now Franklin Resources is the latest of the asset managers to optically look... Read more