Over the long run, financial markets tend to overcome uncertainty. But that doesn't happen without significant volatility in the near term. Investors have been reminded of these realities in 2022. The S&P 500 has dropped 16% so far this year. 

And since asset managers are dependent on stable equity prices to support their assets under management and investment advisory fees, BlackRock's (BLK) stock price has plunged 29% in 2022. But this has arguably created a great buying opportunity for income investors. Let's dig into BlackRock's fundamentals and valuation to better understand why this is the case. 

The company typically beats the analyst consensus

In mid-July, BlackRock shared its financial results for the second quarter, which ended June 30. Because of significant challenges during the period, the company's earnings results were mixed.

BlackRock recorded $4.5 billion in revenue in Q2, which was down 6.1% over the year-ago period. This was in line with the $4.5 billion that analysts were expecting. And it was the eighth quarter out of the last 10 that BlackRock either met or exceeded the analyst revenue consensus.

Even with the 16% drop in the S&P 500 in Q2, BlackRock's average assets under management (AUM) were an unparalleled $9.3 trillion for the period. This represented a 3.2% year-over-year decline in average AUM. Along with a 68.8% plunge in performance fees during the quarter, this explains how total revenue fell 6.1% during the quarter.

Furthermore, BlackRock's non-GAAP (adjusted) diluted earnings per share (EPS) slumped 29.6% year over year to $7.36. This figure came in well below the average analyst prediction of $7.94 for the quarter. What was behind the company's only earnings miss out of the last 10 quarters?

Due to expenses falling more slowly than total revenue, BlackRock's non-GAAP net margin plummeted 870 basis points year over year to 24.8% in the second quarter. This was only partially offset by a 0.9% decline in the company's outstanding share count to 151 million.

The good news for BlackRock is that its superb reputation and product offerings led to $90 billion of net capital inflows during the period. As financial markets recover (as they always eventually do), this will act as a coiled spring to propel the company's total revenue and adjusted diluted EPS higher. That's why analysts believe that the company's adjusted diluted EPS will grow 6.4% annually over the 2021 base of $39.18 for the next five years.

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Image source: Getty Images.

A dividend with room to keep growing

BlackRock's 3% dividend yield is nearly double the S&P 500's 1.6%. The company's payout is positioned to deliver moderate growth in the years ahead as well. 

That's because BlackRock's dividend payout ratio is projected to be 58% in 2022. This still leaves plenty of capital for debt reduction, share repurchases, and business expansion/acquisitions. And this is why I believe that BlackRock will deliver 6% to 7% annual dividend growth for the foreseeable future. 

The valuation is attractive for long-term investors

BlackRock is a fundamentally robust business. It also doesn't appear to be unreasonably valued at this time, either.

This is supported by the fact that BlackRock's trailing-12-month (TTM) price-to-sales (P/S) ratio of 5.1 is just below the 10-year median TTM P/S ratio of 5.2. As has been the case for years, the company is still the leading asset manager on the planet. And this doesn't look like it will change anytime soon, which is why BlackRock could be a smart buy for income investors.