When the asset manager BlackRock (BLK) reported fourth-quarter revenue and earnings in mid-January, the company also announced a large 18.2% increase in its quarterly dividend from $4.13 to $4.88 per share.

This raises the following two questions: Can BlackRock afford such a raise? And should you buy the stock now? Let's look at BlackRock's operating fundamentals, dividend payout ratio, and valuation to answer these questions.

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BlackRock is a fundamentally healthy business

BlackRock's fourth-quarter results were mixed. Even with that being the case, the company turned out a strong quarter for its shareholders. BlackRock reported $5.11 billion in revenue during the fourth quarter, which represented a 14% growth rate over the year-ago period. However, the company did narrowly miss the analyst consensus revenue estimate of $5.15 billion.

BlackRock's revenue miss was arguably less of a poor reflection on the quarter than it was analysts being conditioned to expect a lot from the stock. That's because this revenue miss was BlackRock's first in the past 10 quarters. 

The company's average assets under management (AUM) during the fourth quarter were $9.75 trillion, which was up 19.6% year over year. BlackRock also ended the quarter with over $10 trillion in AUM, which makes it the first asset manager to do so. The significantly higher AUM base was more than enough to offset the strategic pricing declines in certain products to stay competitive with other asset managers. 

BlackRock's non-GAAP (adjusted) diluted earnings per share (EPS) also edged 2.4% higher against the year-ago period to $10.42. This surpassed the analyst consensus of $10.16 in adjusted diluted EPS for the fourth quarter. So, how did BlackRock pull off its 10th straight quarter of beating the average analyst-adjusted diluted EPS forecast?

The answer lies within the company's robust average AUM and revenue growth. As a result of this growth, BlackRock's employee compensation and benefits increased 16.3% year over year (which historically makes up about half of the company's total operating expenses) to $1.56 billion. This was the result of a higher employee headcount and the 8% pay raise that went into effect for all employees last September. In other words, BlackRock's revenue growth was largely offset by increased employee compensation and benefits. The pay raises were detrimental to the company's profitability in the fourth quarter. However, the good news is that vigorous wage growth for all employees should help to attract the best and brightest minds to BlackRock. This should translate into outperformance over its asset manager peers over the long haul.

Looking out over the next five years, analysts are expecting that the stock will deliver 13% annual earnings growth. 

The payout can continue its rapid growth

BlackRock is set to produce nice growth in the medium term. But what's just as important is the fact that the stock's dividend looks to be sustainable.

BlackRock reported $39.18 in adjusted diluted EPS last year. Against the $16.52 in dividends per share that was paid, this works out to a 42.2% payout ratio. This payout ratio should only slightly expand this year since analysts are forecasting BlackRock will generate $42.52 in adjusted diluted EPS. Compared to the $19.52 in dividends per share that will be paid this year, this equates to a 45.9% payout ratio.

Considering BlackRock's payout ratio and forecast earnings growth, the stock should hand out low-teens-percentage dividend increases to shareholders through the next several years. Paired with a market-beating 2.4% dividend yield, this is an attractive combo of growth and yield.

An average valuation for a wonderful stock

BlackRock can easily cover its dividend obligations. So, this leads us back to the question of whether the stock is a buy at this time.

At the current $823 share price, BlackRock is trading at a current-year price-to-earnings (P/E) ratio of 19.4. This is in line with the S&P 500's forward P/E ratio of 19.2. Since BlackRock's growth potential is above average, the stock should command a larger premium than it currently does compared to the S&P 500.

That's why BlackRock is an under-the-radar fintech stock that income and growth investors alike should consider buying at the current valuation.