It has not been a particularly good 2022 for asset management firms. The current stock market correction has left money managers with declining assets and generally lower revenue since some fees are based on asset totals and performance. Their valuations have come down across the board, but that also means there are some good values in this industry at the moment, particularly for income investors.
If you are nearing retirement and are concerned about the direction of the market, consider these three excellent dividend stocks in the asset management industry. Even if the market continues to move sideways or downward, these three stocks have long histories of delivering excellent dividends to boost their total returns.
1. T. Rowe Price Group
T. Rowe Price Group (TROW -5.25%) has seen its stock price drop 41% year to date as its assets under management (AUM) continue to drop. In May, AUM fell to $1.4 trillion, down from $1.69 trillion at the start of the year, and in the first quarter, it had net outflows.
But T. Rowe Price has maintained its excellent $1.20 per share quarterly dividend in the second quarter, at a yield of 3.9% on a share price of $115. Also, it has a sustainable payout ratio of about 36%. That amounts to $4.80 per share annually, which is a sizable chunk of income.
This is the 35th straight year that the company has raised its annual dividend, making it a Dividend Aristocrat. You can count on T. Rowe Price to continue to increase its dividend because it has virtually no debt with about $2 billion in cash, so it has plenty of capital to support it through these lean periods.
2. Franklin Resources
Franklin Resources (BEN -4.25%) runs the Franklin Templeton fund family, along with several others. Like T. Rowe Price, Franklin Resources is a Dividend Aristocrat, having increased its annual dividend for 41 straight years in 2022. On June 8, Franklin declared a $0.29 per share dividend, a jump from $0.28 a year ago this quarter. It has a yield of 4.5%, one of the best in the industry, with a low payout ratio of just 26.7%. Franklin is currently trading at just $25 per share, down about 25% year to date.
Like T. Rowe Price, Franklin saw its AUM drop in May to $1.44 trillion, down from $1.58 trillion at the start of the year. It benefits from having more of its assets in fixed-income funds — $559 million at the end of May, compared to $462 billion in equities, $220 billion in alternatives, and $145 billion in multi-asset. This helped stem some of the losses experienced by shops like T. Rowe Price, which are predominantly in equities.
Franklin’s debt-to-equity ratio jumped up a bit due to some recent acquisitions, but it is still low at 0.7. And it had about $6 billion in cash at the end of the first quarter. So with a low payout ratio, it is in good shape to keep funding that dividend.
BlackRock (BLK -6.39%) is the world’s largest money manager with about $9.6 trillion in AUM, and it is the largest manager of exchange-traded funds with a 34% market share.
BlackRock is the giant of the asset management space, and while revenue, AUM, and earnings were down in the first quarter compared to the previous quarter, they were all up year over year. And unlike the other two fund managers in this article, it had positive net inflows in the first quarter, due to its breadth of fund offerings.
BlackRock pays out a huge $4.88 per share quarterly dividend with a yield of 3% at a share price of about $629. It has a slightly higher payout ratio than the others at 42%, but it is still in a good range. While it is not a Dividend Aristocrat, it has raised its annual dividend for 19 straight years counting this year, so it is well on its way to that status. It also has a low debt-to-equity ratio of around 0.2 with almost $7 billion in cash at the end of the first quarter.
All three of these asset management stocks are good buys right now, particularly for income investors, because they are all available at attractive valuations and have track records of paying consistently high dividends through all market cycles. And when the market does bounce back, they will, too.