Broadridge Financial Solutions, Inc (BR)

BR is a Fintech company based in Lake Success, NY, that specializes in investor communications and tech solutions for the financial services industry. They provide the critical infrastructure that powers corporate governance, capital markets and wealth and investment management.  The main products and services BR provides include:

• Processing and distributing proxy materials to investors 
• Proxy delivery and voting solutions
• Regulatory report and corporate event information
• Tax reporting solutions
• Marketing, trade processing services, and transaction information. 
• SEC disclosure and filing services; registrar, stock transfer, and record-keeping services; 
• Productivity tools for the investment industry
• Outsourcing services such as portfolio management, compliance, and operational solutions

The company was founded in 1962 and operates globally processing trillions of dollars of investment transactions and manages more than 2 billion shareholder communications each year.

Source(s):

https://www.broadridge-ir.com/home/default.aspx; https://finance.yahoo.com/quote/BR/profile?p=BR

Some metrics I look for – 

Safety:

Dividend Safety Score – 75 out of 99 – considered “safe”

Current Ratio (look for a number higher than 1, higher the better) – 1.2

Debt to Equity (lower the better) – 0.00

Payout Ratio – 41.61%

Estimated EPS Growth Rate – 5 year – 11.80%

Dividend history: 

Years of dividend increases: 14

Dividend growth rate – 5 year – 14.04%

Current yield: 1.76%

Current dividend: $2.56

Valuation: 

DCF model:  $127.87

P/E Mean Reversion: $164.60

Dividend Yield Theory: $164.10

Average of the three valuations – $152.19

Analyst Consensus Estimate (1 Year) – $180.00

Current price: $148.25  (02/25/2022)

Potential discount: 2.65% 

Commentary:

BR is a critical player in the investment industry but remains unknown to most investors.  While unknown, they power the majority of the investment communications and voting processes for corporate events.  If you have ever received a voting communication on a company you own, BR is most likely behind the scenes of that communication. They have over 5000 customers and operate a recurring revenue model that provides a 98% revenue retention rate.

The company recently released their earnings report on February 1st and showed growth in each of their business lines and are guiding for 12-15% revenue growth, 19% operating margin,  and EPS growth of 11-15% for 2022, which will support the growing dividend, which has been growing at a 14% CAGR for the past 5 years. This under-the-radar tech company has returned 110% over the past 5 years and provides a nice complimentary holding to the mega-cap tech companies that dominate most portfolios.  

The current valuation would be considered a fair price but no discount is available right now, though it is trading towards the lower part of the 52-week range and analyst estimates are showing continued growth and a 1-year price target that is 21.5% higher than the current stock price.

Let me know what you think!

Disclosure: I do not own BR.