Schroders: A FTSE 100 Dividend-Raising Star

LONDON -- In an outcome that's tough on investors, the FTSE 100 (UKX) has failed to deliver a rising dividend payout over the last few years.

Just look at the iShares FTSE 100 ETF (LSE: ISF  ) , for example. This is an exchange-traded fund that tracks the benchmark index, and we can see the aggregate payment from Britain's top 100 companies has yet to regain its pre-recession peak:

Year 2007 2008 2009 2010 2011
Dividend per share (pence) 19.1 20.2 17.1 16.2 18.1

But some companies within London's premier index have performed well on dividends, despite these austere times, and this series aims to seek them out. One such name is Schroders (LSE: SDR  ) .

The big question is whether the company's dividend continue to out-perform its index. Let's take a closer look.

Schroders is a fund manager serving client-investors such as large corporations, organizations in the public sector, pension funds, charities, high-net-worth individuals, and retail investors. With the shares at 1,656 pence, the market cap is around 3,747 million pounds. This table summarizes the firm's recent financial record:

Year 2007 2008 2009 2010 2011
Revenue (millions of pounds) 1,192 936 769 1,439 1,502
Net cash from operations (millions of pounds) 505 134 371 1,067 427
Adjusted earnings per share (pence} 105 76 57 112 116
Dividend per share {pence} 30 31 31 37 39

So the dividend has increased by 30% during the past five years -- equivalent to a 6.8% compound annual growth rate.

Schroders earns around 94% of its profits from asset management and 6% from private banking. At the last count on Nov. 8, the firm was managing around 203 billion pounds of funds. From that, it generates 84% of revenues from management fees alone. A further 2.5% comes from performance fees, which have the potential to grow much larger when investment conditions become easier. There's also an 11% revenue take from other fees and 2.5% from interest on funds held in the company's private banking arm.

The financial landscape has been austere for several years, but Schroders has flourished. It puts that success down to its 3,000 or so "talented people" who work from 33 offices in 26 countries across Europe, the Americas, Asia, and the Middle East, all helping the firm to invest in equities, fixed income, multi-asset, and alternatives.

If the company is trading well now, it's difficult to see it faltering when world economic conditions improve. That makes me optimistic about the dividend's prospects.

Schroders' dividend growth score
I analyze four different features of a company to judge whether its dividend can continue to rise:

1. Dividend cover: earnings covered last year's dividend almost three times. 4/5

2. Net cash or debt: the most recent balance sheet shows net cash. 5/5

3. Cash flow: strong support for profits from cash flow. 4/5

4. Outlook and recent trading: satisfactory recent trading; outlook cautiously positive. 4/5

Overall, I score Schroders 17 out of 20, which encourages me to believe the firm's dividend can continue to out-pace dividends from the FTSE 100.

Foolish summary
There's a good showing on all four indicators. The only issue is valuation.

Right now, the forecast full-year dividend is around 43 pence per share, which supports a possible income of 2.6%. That valuation is a bit rich for me, so I'll keep Schroders on watch.

Schroders is one of several dividend out-performers on the London stock exchange. There's one man who's as keen as I am to find, and invest, in them. I suggest you read all about his best investment ideas now in this free, time-limited report, while you have the chance: "8 Income Plays Held by Britain's Super Investor."

This free report analyzes the 20 billion-pound portfolio of legendary high-yield expert Neil Woodford. Click here to discover his favorite dividend opportunities with good growth potential.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2160823, ~/Articles/ArticleHandler.aspx, 9/19/2014 4:20:11 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 17,280.38 14.39 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASD 4,579.79 -13.64 -0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/19/2014 11:35 AM
ISF $680.70 Up +1.60 +0.24%
iShares FTSE 100 CAPS Rating: No stars
SDR $2466.00 Up +22.00 +0.90%
Schroders CAPS Rating: No stars

Advertisement