The Company in a Nutshell
- More than 1/3 of their managed assets come from investors outside the U.S. and Canada.
- Their Aladdin platform assists financial advisors and portfolio managers in managing their clients’ money.
- ETFs are not a trend; they’re the future of investing.
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What the CEO said: What we say:Investment Thesis
BLK is a winner and will be a keeper for decades. BLK enjoys size and scale like no other asset manager. The company sees steady organic growth even for its higher fee-earning equity products. As long as BlackRock grows its assets under management, revenue and earnings will follow. To ensure it keeps its edge against competition, the company also agreed to acquire Global Infrastructure Partners to create a combined infrastructure platform of more than $150B and is reorganizing some of its other platforms, primarily its Aladdin investment tech platform and illiquid alternative investments. The company is also a leader in the growing investment field of ETFs and has a strong relationship with several institutional customers. It provides a steady source of cash flow while expenses are lower vs traditional fund managers. Institutional investors are more inclined to stay with their providers for several years. We believe BLK’s strong position in passive investments and strong fund performance will attract assets at above industry-average rates over the next few years.Dividend Triangle
5-Yr Rev. Growth | 0.00 % |
5-Yr EPS Growth | 0.00 % |
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Potential Risks
Asset managers are obviously more likely to suffer in bear markets. We saw an excellent example of this in 2022 as AUM went from $10T+ at the end of 2021 to $8.6T at the end of 2022 (now back to 10.5T as of April 2024). This directly impacts the company’s revenue and earnings as fees are earned as a percentage of assets under management. The company must find a way to increase its actively managed assets, as these encompass its most profitable products. If it can improve performance and attract new investors, BLK will become a mature business with modest growth. The company’s size may become a burden as it could become less agile. We can see a slowdown in all aspects of the dividend triangle. The firm makes less money from its cash and fixed-income investment products than with long-term equity investing vehicles. Finally, regulation could also be a concern with potential policy changes.
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Dividend Growth Perspective
The company exhibits an impressive dividend growth rate track record since 2010. Over the past 5 years, BLK has maintained an 11%+ annualized dividend growth rate. Unfortunately, BLK disappointed shareholders with its 2023 increase of 2.5%. However, the current payout and cash payout ratios are well under control. We expect a mid-single-digit dividend growth rate going forward, even if the payout ratio is under control. As the dividend triangle slows down, we have reviewed our rating from 5/5 to 4/4 in early 2023. In 2024, BLK increased its dividend by a meager 2%, we had to decrease its dividend safety score from 4 to 3. The company went from 18%, 4.5% and then 2% increase in the past three years.
This is a very solid company if you are seeking a financial stock; we are just not convinced that the Financial Sector’s performance in the short term will be strong.
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Valuation
(Data for `ddm_recent_annual_dividend` field are missing to build DDM tables)
Video Tutorial: How to Read the Stock Cards DDM Valuation
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- All financial metrics are updated weekly.
- The DSR PRO rating and Dividend Safety Score are updated quarterly.
- The analysis (investment thesis, risk potential, dividend growth perspective and DDM calculation) is reviewed every 6 months.
- The PDF format includes only comments (no metrics) and is reviewed every 6 months.