Over the last three and five years, Thomson Reuters’s shares have returned 105.1% and 173.4%, respectively. That’s dramatically better than the S&P 500’s returns of 27.7% and 92.9%.
The company’s financial stewardship is a major driving factor, as management has returned $5.8 billion to shareholders from its lucrative sale of shares in the London Stock Exchange Group plc. A generous 10.2% dividend hike to $0.54 per share and a planned $1 billion share buyback further a strong commitment to shareholder value.
Meanwhile, the company is also using its substantial cash to invest in innovations such as AI to propel annual revenue 6.5 - 8% higher each year. That’s why it’s a top pick for our subscribers.
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THOMSON REUTERS CORP. (Toronto symbol TRI; www.thomsonreuters.com) now focuses on selling specialized information and software to the legal, tax and accounting fields. That follows the sale of 55% of its Refinitiv financial information business to Blackstone Group LP (New York symbol BX) on October 1, 2018, for $17 billion (all amounts except share price in U.S. dollars). The company also owns the Reuters news service.
In January 2021, Thomson and Blackstone sold Refinitiv to London Stock Exchange Group plc (Over-the-counter Pink Sheets symbol LDNXF) in an all-stock transaction.
Since then, Thomson has steadily sold its LSE shares, including the recent sale of its remaining stake for $500 million U.S. As a result, it no longer owns any LSE shares.
The cash will help Thomson with its plan to buy back $1.0 billion U.S. of its shares by June 30, 2024. That’s equal to 1% of its $105.7 billion (Canadian) market cap.
As well, Thomson increased your quarterly dividend by 10.2% with the March 2024 payment. Investors now receive $0.54 U.S. a share instead of $0.49 U.S. The new annual rate of $2.16 U.S. yields 1.3%.
Growth Stocks: Thomson Reuters’ cash is being put to good use for shareholders and future prospects
The cash from the LSE sales is also helping the company make acquisitions. It recently paid $800 million for Pagero Group AB, a Swedish firm that specializes in electronic invoicing services. That helps its clients comply with tax reporting requirements in various countries.
As well, thanks to the launch of new products, particularly those that use artificial intelligence tools, Thomson expects its revenue (excluding acquisitions) will rise 6% in 2024. That annual revenue growth should accelerate to between 6.5% and 8.0% for 2025 and then 2026.
The higher revenue will probably lift Thomson’s projected earnings by roughly 11%, from $3.69 a share in 2024 to $4.11 in 2025. The stock trades at a high 41.7 times that 2025 forecast. That’s still a reasonable multiple in light of its high share of its niche markets.
Thomson has now raised its dividend by an average 8.4% annually over the past 5 years. Its TSI Dividend Sustainability Rating is Highest.
Recommendation in The Successful Investor: Thomson Reuters is a buy.
