As it continues to add to its client base within its unique niche in the investment industry, Broadridge makes a strategic acquisition, buying the largest transactional printer in North America.
BROADRIDGE FINANCIAL SOLUTIONS INC. (New York symbol BR; www.broadridge.com) serves the investment industry in three main areas: securities processing, transaction clearing and investor communications. In fact, the company processes 90% of all proxy votes in North America.
Broadridge was a subsidiary of Automatic Data Processing until April 2007; that’s when ADP spun it off as a separate firm. Since then, the stock is up 236%.
In the fiscal year ended June 30, 2016, Broadridge’s revenue rose 7.5%, to $2.9 billion from $2.7 billion in 2015. While the company continues to attract new clients, it is also holding on to existing ones. Revenue from recurring fees jumped 9% in 2016, and accounted for 65% of the total.
The company earned $332.0 million in 2016, up 8.1% from $307.0 million. Earnings per share rose 10.5%, to $2.73 from $2.47.
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Dividend Stocks: New DST unit should add $1 billion annually
Broadridge also uses acquisitions to fuel its growth. In July 2016, it paid $410.0 million for the North American Customer Communications business of DST Systems (New York symbol DST).
This business is the largest transactional printer in North America. Transactional printing refers to the production and mailing (or emailing) of bills, statements, invoices, cheques, insurance policies and other documents with content unique to each recipient.
The company expects the DST unit to add $1 billion to its annual revenue. It should also contribute between $0.11 and $0.14 a share to Broadridge’s earnings in the first year, and $0.21 a share in the second year.
The company should earn $3.13 a share in fiscal 2017, and the stock trades at 21.7 times that forecast. That’s reasonable p/e in light of Broadridge’s high market share. It also recently raised its dividend 10.0%. The new annual rate of $1.32 yields 1.9%.
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This stock is finally starting to get the attention it deserves given its lock on the proxy vote process and rising dividend.