Holy guacamole, October has been a busy month!
While the month of September was a bit quiet as I missed my goal of investing $2,000 to $3,000 in new capital due to limited buying opportunities, I have more than made up for that this month.
My recent purchases have also been focused on adding to existing positions within my portfolio as opposed to opening new positions, but that changed as well with this purchase.
Why the change?
In a nutshell, I have been looking at adding to my holdings in the Financials sector, and as tempting as it was to add to one of my existing positions, I felt that BlackRock was too good of an opportunity to pass up right now.
Background on BlackRock
Similar to one of my existing holdings, Franklin Resources, BlackRock, Inc. is a publicly owned investment manager that provides its services to institutional and individual investors.
BlackRock is the world’s largest asset manager with $6.4 trillion assets under management, which is an 8% increase in AUM compared to last year. BlackRock really separates themselves from a company such as Franklin Resources in two key areas:
- Attractiveness to institutional investors due to their size and daily average volume
- Exposure across both actively managed funds and passively managed funds
The latter point is quite important–as more and more people are moving towards passive investing through index funds, an asset manager can be at risk if they are not prepared for that shift as their primary source of revenue is from fees charged to investors.
BlackRock is considered by some to be the king of passive investing due to the popularity of their iShares ETFs. In their most recent quarterly earnings report, they had $11 billion of quarterly net inflows (new money coming under their management) which was led by iShares. At this time, BlackRock generates approximately 50% of their revenue via passive index funds therefore they are extremely well positioned for the shift away from actively managed funds.
The company was founded in 1988 and is headquartered in New York, New York. They have offices across the globe with a presence in approximately 30 different countries.
BlackRock By the Numbers
BlackRock has been rewarding investors with 14 years of uninterrupted dividends and 9 years of increasing dividends. The outlier was 2009 when they held their dividend steady during the Great Recession.
Taking a look at Simply Safe Dividends, we see that BlackRock has a dividend safety score of 98 and their current dividend yield of 3.12% is well above their 5-year average yield. The current yield is actually the highest that it has been in over five years.
However, the stock has been hammered this year with a decline of approximately 25% since the beginning of the year when the stock was trading at approximately $525/share.
As seen above via FAST Graphs, BlackRock is trading below their normalized P/E ratio by roughly 16%. The combination of the stock trading below the normal P/E ratio and the dividend yield exceeding the 5-year average are signs that the stock may be undervalued.
BlackRock has had EPS growth in excess of 20% over five of the last seven quarters, four of those being the most recent consecutive quarters, and has had a solid double-digit EPS growth over the last seven quarters. Their strong EPS growth has been represented in their strong dividend growth as well.
Here is a look at my own spreadsheet that tracks the dividend growth of each holding:
Looking at their track record, one can see that they have consistently raised their dividend by a respectable 10% or more in most years. Based on current projections for their dividend payments this year, they will be north of 20% YoY in dividend growth again.
As I mentioned during the recap of my Home Depot purchase, you will see that BlackRock also froze their dividend in 2009 yet they have still maintained a very respectable 14% dividend growth over a 10-year period.
Opening New Position
As I mentioned earlier, I was giving serious consideration to adding to one of my existing positions in the financial sector with the price of Franklin Resources being extremely tempting as they have dipped below $30/share.
However, as I wrote during my analysis of a losing position in BEN, I have been hesitant to go too strongly into Franklin Resources given concerns on their AUM that continues to decrease and forecast for flat to negative earnings growth.
Given my concerns on adding to Franklin Resources, I decided to run a screen against the Financials sector and that is where BlackRock caught my attention. And then as the market opened today and I saw the price was declining, I could not resist.
Here is a recap of my purchase:
The 5 shares purchased at $396.00/share will add an additional $62.60 in forward dividend income.
I will continue to watch BlackRock, as well as Home Depot, for potential secondary purchases if the price continues to move downward. With BlackRock, I would be looking to add if the price declines by approximately 5% from my purchase point or around $376.00/share.
However, I will admit that with the amount of capital that I have invested this month, I am hoping the market pauses for a little bit so I have the funds available to take advantage if the prices do move farther down.
While I have been very focused on adding to my existing positions, it is important not to fear change and be willing to adapt to changing circumstances. By doing so, I believe that I have been able to add a position in an extremely solid company at an attractive price.
In addition, the purchase of BlackRock brings my Projected Annual Dividend Income (PADI) up to $4,990.02!
That means that I am less than $10.00 away from my goal of reaching the $5,000 forward income milestone. When I purchased Home Depot, I mentioned that I was confident that I would reach my goal, but I did not expect to get so close only a couple of days later.
For the time being, I am not yet planning to sell my position in Franklin Resources, however over time I may look to shift that investment into BlackRock. Looking back at the Great Recession, I see that BlackRock weathered that storm much better than Franklin Resources did in terms of stock price, however Franklin Resources did continue to increase their dividend through that period.
Overall, I am comfortable making room for both in my portfolio but will continue to evaluate that moving forward.
What do you think of BlackRock?
Do you like this purchase?
10 thoughts on “Recent Buy :: BlackRock, Inc.”
Hi Divvy Dad,
Another purchase? You’re on fire! I think it’s a good one, I have Blackrock on my watchlist as well. I hope it stays under $400 for some time and I may initiate a purchase after a couple of weeks when I have some funds. I don’t own any financials yet so it would be a nice fit to my portfolio.
By the way, I love that graph of dividend growth. I think Engineering Dividends is using a similar one. I think I am going to use it as well for stocks in my portfolio. I am already using the portfolio tracker template from TwoInvesting that you recommended and am loving it, so many thanks for that! 🙂
Thanks BI, I’ve definitely been aggressive this month with new capital being deployed after last month was a little quiet!
As I contemplated adding to BEN, I just couldn’t justify adding right now until I see more evidence that they are able to shift towards the trend in passive investing. That is an area that BlackRock shines, therefore they were more attractive to me right now–and as the price came down below $400 I had to jump on it. Of course, today they have been down pretty big and just narrowly missed hitting my limit price for a secondary buy.
Re: the graph, you’re right that ED is using this same dividend growth tracking as I actually modeled this after his when he shared it in a recent update. I chatted with him a little and introduced this to my spreadsheet. I am happy to hear that you’re using the tracker template from TwoInvesting. I’ve been thrilled with it so far and added a few things to it as well.
Solid buy. Don’t own it, but have considered it in the past DD. Nice combination of yield and potential dividend growth. Right in the sweet spot of 3%+ and 8%+, respectively. Any reason you know of for this years price decline? Great analysis. Tom
Thanks Tom, and agree that it is right in that sweet spot. Regarding the price decline, based on my analysis it has largely been the whole of the financials sector that has been on a decline this year. Looking at BlackRock specifically, they have continued to perform quite well with earnings and revenue each quarter–although this latest quarter they did miss estimates slightly on revenue.
really throwing down some stacks lately. heard of the name before and definately know about ishares but besides that didnt know much. great analysis and buy by the looks of it.
10$ away from your goal? congrats man even with drips you will hit that!
killing it man
Thanks PCI, and I will admit that as I looked back at the month I was a little surprised myself in how much I’ve invested this month. I’m trying to reload right now as there are few holdings that are starting to look quite attractive.
I’ll be sharing an update on my goal tomorrow, as I need to set the bar a little higher for the last 2 months of the year!
Great purchase, DD! I don’t know very much about the asset management stocks as I have almost no financial sector exposure, but it seems like a compelling buy at these valuations based on your analysis. Congrats in advance on hitting $5,000 in PADI. Keep it up!
Thanks Kody, I have a few holdings in the sector and felt that this was a more compelling buy with a better outlook than one of my holdings that I was thinking of adding to at the current price.
Glad to have you as a fellow shareholder in BLK, DivvyDad. I believe you entered at a good price for the long-term. Curious to know if you took advantage of the additional dip this week.
Amazing progress you’ve made on your forward dividend income in just 6 months.
While I don’t have anywhere near the number of shares that you have, I’m happy to enter the fold. I had a limit order in for a secondary purchase and the additional dip missed triggering that buy by about $0.25/share. Had I been able to be actively monitoring the price, I likely would have revised my order as it would only have been a couple of dollars difference. Unfortunately my schedule precluded me from actively watching and I was bummed my order didn’t execute.