One of the few companies left on my watchlist in the financial sector is Franklin Resources (BEN). I first heard about the company late last year, around the time Dividend Growth Investor wrote his article on BEN. After I purchased BLK, I thought BEN would be the other asset manager I’d add, and that’d be it. But recently there’s been some hubbub about another asset manager, T. Rowe Price (TROW). This is a company that I’ve never followed before, but a lot of people seem to like (see Dividend Mantra’s analysis here for an example). Based on what I’ve seen, TROW has a lot to like as well. High dividend yield, no debt. And most importantly, a juicy $2.00/share special dividend in April! Both stocks look appealing in their own ways. Sadly, I can only own one. Which one’s better? Let’s find out. Welcome to the “Battle of the Bankers” 2015!

The Contestants:


Franklin Resources, Inc. (Franklin), is a holding company. Franklin together with its various subsidiaries (collectively, the Company), is referred to as Franklin Templeton Investments, is a global investment management organization offering investment management and related services under the Franklin, Templeton, Mutual Series, Bissett, Fiduciary and Darby brand names. It provides services to investment funds in jurisdictions globally, which include the United States- and non- United States-registered open-end and closed-end funds, unregistered funds, and institutional, high net-worth and separately-managed accounts. The Company’s investment management and related services include fund administration, shareholder services, transfer agency, underwriting, distribution, custodial, trustee and other fiduciary services. Its sponsored investment products include a range of equity, hybrid, fixed-income and cash management funds and accounts, including alternative investment products. [from Scottrade]


T. Rowe Price Group, Inc. is a financial services holding company that provides global investment management services through its subsidiaries to individual and institutional investors in the sponsored T. Rowe Price mutual funds, investment portfolios, sponsored investment portfolios, and portfolios offered through annuity life insurance plans in the United States. The Company derives their revenue and income from investment advisory services provided by its subsidiaries, T. Rowe Price Associates and T. Rowe Price International Ltd. The Company’s advisory services include management of stable value investment contracts and a distribution management service for the disposition of equity securities its clients receive from third-party venture capital investment pools. The Company also provides certain administrative services as ancillary services to its investment advisory clients which include mutual fund transfer agent, accounting, distribution, shareholder services and other services. [from Scottrade]

Round One: Basic Criteria:

I’m guessing you all know my screening criteria by heart at this point, but if not, here you go.


  • Pays a dividend: Yes
  • Has 5+ years of dividend increases: Yes (35 years)
  • Has not frozen dividend for over 8 quarters: Yes
  • Has a Chowder number of 12 or more: Yes (12.5)
  • Has am EPS payout ratio of less than 70%: Yes (16.04%)
  • Pays a dividend monthly or quarterly: Yes (Quarterly; January, April, July, October)

20150311 BEN FG

  • Has an S&P Quality Ranking of ‘A-‘ or better: No (B+)
  • Has generally increasing earnings over the past 10+ years: Yes
  • Is fairly valued/undervalued according to the Normal P/E ratio (blue line): Yes
  • Is fairly valued/undervalued according to the Intrinsic P/E ratio (orange line): Yes


  • Pays a dividend: Yes
  • Has 5+ years of dividend increases: Yes (29 years)
  • Has not frozen dividend for over 8 quarters: Yes
  • Has a Chowder number of 12 or more: Yes (14.5)
  • Has am EPS payout ratio of less than 70%: Yes (46.74%)
  • Pays a dividend monthly or quarterly: Yes (Quarterly; March, June, September, December)

20150311 TROW FG

  • Has an S&P Quality Ranking of ‘A-‘ or better: Yes (A-)
  • Has generally increasing earnings over the past 10+ years: Yes
  • Is fairly valued/undervalued according to the Normal P/E ratio (blue line): No
  • Is fairly valued/undervalued according to the Intrinsic P/E ratio (orange line): Yes

Winner: Tough call here, isn’t it? BEN wins in the payout ratio, dividend growth streak, and valuation criteria. TROW wins on Chowder number, quality ranking, and earnings growth. Now at this point, I could both say they are good investments, and call it a day. But that’s no fun. Now, personally, I value quality rankings, earnings growth, and the Chowder rule most highly. Heck, I sold Nucor because of them.  So to me, although it is a bit more fairly valued than BEN, I am giving this round to TROW.

Round Two: What Others Think


  • S&P Capital IQ: 4-star Buy
    • Scale is 1-5, 1 being ‘strong sell’, 5 being ‘strong buy’
  • Thompson Reuters StockReport: 6 (optimized score of 4)
    • Scale is 1-10, 10 being best, 1 being worst
    • Optimized scores weight insider trading and price momentum heavier than other criteria
  • Morningstar:
    • Moat: Wide
    • Stewardship: Standard


  • S&P Capital IQ: 4-star Buy
    • Scale is 1-5, 1 being ‘strong sell’, 5 being ‘strong buy’
  • Thompson Reuters StockReport: 10 (optimized score of 9)
    • Scale is 1-10, 10 being best, 1 being worst
    • Optimized scores weight insider trading and price momentum heavier than other criteria
  • Morningstar:
    • Moat: Wide
    • Stewardship: Exemplary

Winner: Now honestly, I don’t really put much weight on this section in general, with the exception of Morningstar rankings. However, TROW has a much higher StockReport score and a better stewardship rating, so this one goes to TROW.

Round Three: Financials:


BEN has a dividend yield of 1.16%. The company pays out $0.15/share quarterly, $0.60 annually. Though this may not seem like much, do note that BEN loves to pay out special dividends. Here’s a quick list of recent special dividend payouts:

  • 01/2015: $0.50 ($1.50 split-adjusted)
  • 12/2012: $3.00
  • 12/2011: $2.00
  • 12/2009: $3.00

Those are quite nice chunks of change, and I like the fact that BEN pays them. To me, it shows prudence with capital allocation, especially in down years. There’s less dividend obligations, which frees up capital for solid acquisitions, buybacks, or paying down debt when needed. However, at the same time, I am not too fond of that. As someone who wants to retire early, I want predictability of income as much as high income. BEN may or may not pay those special dividends, and if it’s a year they don’t, my income is that much lower.

TROW, on the other hand, has a current dividend yield of 2.56%. The company pays $0.52 quarterly, $2.08 annually, over triple BEN’s payout. And interestingly, TROW is no stranger to special dividends either. The upcoming $2.00 one aside, TROW paid a $1.00/share special dividend back in 2012. It seems that TROW chooses to pay out more cash in general for normal dividends, at the expense of high and frequent special dividends. Depending on your purposes and goals as an investor, that may or may not be a good thing. But for me, it’s easier to plan around stable income rather than special dividends, so I prefer TROW’s policy a bit more.

Payout ratio:

  • BEN: 16.04%
  • TROW: 46.74%

FCF payout ratio (dividends / FCF, both per share):


  • BEN: 0.2 debt/equity ($1.198 billion of debt)
  • TROW: 0.0 debt/equity (debt-free)

Share repurchases:

  • BEN: Net reducer: (682.17 million in 2010, 621.83 million today)
  • TROW: Slight net issuer (259.42 million in 2010, 260.73 million today)


  • BEN: 3:1 split in 2013, 2:1 split in 1998, 3:2 split in 1997
  • TROW: 2:1 in 2006, 2:1 in 1998, 2:1 in 1996

I think TROW takes it slightly, due to being debt-free and having a higher, more consistent dividend. I love BEN’s share buybacks and frequent special dividends though.

Winner: TROW



P/E: 14.2 for BEN, 18.6 for TROW

One-year forward P/E: 13.1 for BEN (slight earnings growth), 14.6 for TROW (also indicates earnings growth)

Gross margin: Unknown for BEN and TROW

Operating margin: 37.76% for BEN, 47.49% for TROW

Net profit margin: 28.20% for BEN, 30.88% for TROW

Winner: TROW


Future Projections: 

BEN has 4.9% earnings growth over the next three years, with a total rate of return of 30.10% over the same time frame.

TROW has 11.1% earnings growth over the next three years, with a total rate of return of 22.86% over the same time frame.

Since BEN is much more undervalued than TROW, it stands to reason that BEN will have a higher rate of return, should both revert to a standard P/E ratio of 15. TROW’s projected earnings growth is much better though, as also indicated by the one-year forward P/E ratio. As I said above, I don’t care much for estimates, but earnings growth is more important to me.

Winner: TROW

Other Notes

Like many other asset managers after the Great Recession, BEN has done a fantastic job increasing its assets under management (AUM). In 2010, BEN managed $644.9 billion; in 2014, that number was $898.0 billion. The CAGR of 8.62% is very solid growth, and nothing to be worried about. BEN is very internationally focused: “more than half of its AUM [are] invested in global/international strategies, and one third of managed assets [are] sourced from clients domiciled outside the U.S”. The company does on-the-ground research in 20 countries, and has trading desks in 12. I am a little uncomfortable with the founding Johnson family still owning a majority of the shares. Yes, they are willing and able to protect their company and their wealth, but I find that family-owned companies are often resistant to change since control is so concentrated. The current CEO is the son of the company’s founder, for example.

Something I found interesting is that the company’s culture is generally siloed. I actually view that as a good thing, since although each portion of the company shares administrative resources, they are allowed to hire and fire independently, which allows for skill specialization and shared knowledge and aptitude. To wit:

While the firm’s growth through acquisition has opened it up to potential cultural and managerial conflicts, Franklin prefers to use a hands-off approach to running its different investment franchises. Each of the fund families shares compliance, call centers, and other administrative capabilities with the parent, but is solely responsible for the hiring and training of its own personnel. This has allowed them to maintain control over their investment disciplines, while benefiting from the scale advantages of Franklin’s overall operations.

Source: Morningstar analyst report (PDF)

TROW has also done quite nicely in the post-Recession world, growing its AUM from $482.0 billion in 2010 to $746.8 billion in 2014. That yields a CAGR of 11.57%, better than BEN’s. That makes sense, as BEN has a much larger market cap ($32.2 billion) than TROW ($21.3 billion), implying that TROW is smaller and a faster grower. The company has seen strong growth from target-date retirement funds, signifying TROW is following the trend from active-managed funds to more passive funds. In five years, AUM invested in target-date funds has tripled from $43.7 billion to $142.4 billion.

Morningstar is very complimentary of management:

T. Rowe Price is unique among the asset managers we cover in that it has traditionally been run by a group of top officers (the management committee) who consult one another before making major decisions. … The management committee, which is responsible for guiding, implementing, and reviewing major policy and operating initiatives, has, in our view, done an exemplary job over the years. Capital allocation has been prudent, with the company carrying little to no debt on its books, engaging in very little acquisition activity, and tending to return cash to shareholders in the form of share repurchases and dividends. In the asset-management industry, debt can be a net negative, as was seen during the 2008-09 financial crisis when several firms that were carrying larger levels of debt had to scramble to raise capital (including issuing additional equity) after seeing revenue and profitability drop dramatically in response to the market decline. Compensation has tended to be reasonable, with executive pay being in line with most of the larger asset managers we cover. The one issue we do have is that T. Rowe Price has been a heavy user of stock options, which not only dilute existing shareholders but also blunt the impact of its share repurchase programs.

Source: Morningstar analyst report (PDF)


And the winner is … TROW! There were three rounds that BEN came very close to taking, but for my purposes, TROW is a slightly better investment. I have no doubt that BEN is a good investment, especially with the international focus. I also like the positives in family control in terms of safety of the dividend, though the centralization of control is also a negative. I’m considering leaving BEN on my watchlist for a much later purchase. However, in the places where it counts – the dividend, earnings growth, quality – TROW takes the cake. I also like TROW’s management, lack of debt, and shift to more passively-managed offerings. Ergo, although I feel that both are excellent investments, I will be swapping BEN for TROW on my watchlist. Hope I can buy it in time for that nice special dividend!

Which one would you prefer to buy? Or do you want to own both?

Disclosure: Long BLK

All data is accurate as of market close, 03/11/2015. My stock analysis archive page has been updated accordingly. Please read my disclaimer here before choosing to invest. Company logos belong to their respective companies. Data source is FAST Graphs, David Fish’s US Dividend Champions List, or company materials, unless otherwise indicated.



  1. Henry March 12, 2015 at 11:39 AM

    Oh, I like the new layout. Great job! As for the pick, I’d go with BEN. It’s cheaper compare to TROW and you have a billionaire with the majority of their net worth in the company.
    Henry recently posted…Recent Buy – Kennedy-Wilson Holdings (KW)My Profile

    • DividendDeveloper March 12, 2015 at 12:28 PM

      Thanks. I’m not much of a graphics guy, but I like this one for now. Fair enough, and I agree with both points. I actually wish I could own both. I feel that both will perform well over the long run. But I’m not sure I’d feel comfortable with 3 asset managers in my portfolio. Oh well, can’t catch ’em all.

  2. Dividend Growth Investor March 12, 2015 at 12:00 PM

    Nice analysis.. I think BLK is a solid choice.

    I recently initiated a position in TROW… I analyzed BEN but I bought TROW instead. I also added to AMP… I think it is easier to switch mutual funds/etf’s than switch advisers..
    Dividend Growth Investor recently posted…Dividend Investors: Avoid Living in the PastMy Profile

    • DividendDeveloper March 12, 2015 at 12:25 PM

      AMP is one I’ve never really looked at. Seems like the entire asset management subsector is generally a good place for dividend growth investors to look.

  3. Dividend Mantra March 12, 2015 at 12:28 PM


    Love to see the two go head to head. Great comparison. :)

    I also think TROW is slightly superior in a number of metrics, but BEN is great as well. It’s like choosing between great and slightly greater. I doubt one would go wrong owning either, or preferably both.

    Glad to own TROW here, but wouldn’t mind buying a chunk of BEN at some point down the road.

    Thanks for running them down.

    Best regards!
    Dividend Mantra recently posted…Recent BuyMy Profile

    • DividendDeveloper March 12, 2015 at 12:32 PM

      Thanks! I really do want both, but I really don’t feel comfortable owning 3 asset managers at this time, I don’t think. Thanks for reading.

  4. Warren Lee March 12, 2015 at 1:17 PM

    Hey DD,

    I found it interesting that both of these bankers were listed in an article from 247wallst titled, “Stocks That Could Get Crushed If Market Volatility Rises Include Hartford Financial ” here’s what they had to say…

    “Franklin Resources Inc. (NYSE: BEN) comes in 3rd on the list with a very negative correlation to the VIX. The company is a mutual fund powerhouse and continues to grow its huge asset base. With the well-known Franklin and Franklin Templeton mutual funds still taking in a resurgent, but still struggling level of retail investments, a protracted dive in the equity markets is never good for big asset managing financials. When panic shows up, so do redemptions. Investors are paid a 0.9% dividend. The consensus price target is $60.47. The stock closed at $54.69.

    T. Rowe Price Group Inc. (NASDAQ: TROW) is another top money management firm, with a host of successful mutual fund offerings, and comes in number four on the Jefferies list. While like Franklin Resource, the company has a very good product base, and is widely used in corporate 401-K plans, a big market sell-off can mean big redemptions, hence the elevated negative correlation. Investors are paid a solid 2.3% dividend. The consensus price target is $90.24. Shares closed trading on Tuesday at $79.04.”

    Does this concern you at all?

    – Warren
    Warren Lee recently posted…Expert Panel of Peer-to-Peer Lending Pros Reveal Best 3 Investing TipsMy Profile

    • DividendDeveloper March 12, 2015 at 1:51 PM

      Short answer for me is no, it does not. The thing is, both BEN and TROW have been through this before several times. Just look at the drop in price and earnings during the Recession. Yet they’re still doing okay. Their dividend is well-covered, which reassures me. And I intend to hold my positions for decades. Chances are that if a drop manifests, I’ll just keep reinvesting dividends and buy that much more stock at depressed prices. The only reason I would be really worried was if the dividend was threatened, due to extremely high redemption rates. I don’t ever see that happening, so I don’t honestly care too much.

  5. Ryan @ My Dividend Growth March 12, 2015 at 5:55 PM

    DD, I also really like this new look to the site, good work! Wonderful analysis here, and I agree with the overall sentiment that BEN, BLK, & TROW are all worth owning, but your head to head comparison was pretty convincing for TROW. I’ll be curious to see when you dive in and wish you lots of success to come!
    Ryan @ My Dividend Growth recently posted…Recent Buy: March 11th, 2015My Profile

    • DividendDeveloper March 12, 2015 at 7:35 PM

      Thank you, Ryan! Honestly, I was a bit surprised that it turned out the way it did. But hey, facts are facts. I usually make my purchase at the beginning of the month, when I get my paycheck deposited. My current shortlist is PH, MON, WBA, and TROW. I suspect it’ll be TROW because of that special dividend. Stay tuned!

  6. Mr. Stock Fox March 12, 2015 at 8:41 PM

    Great comparison, thanks for spending the time on this. I recently started buying some shares in TROW and have been eyeing both for a while now.
    Mr. Stock Fox recently posted…Weekly ArticlesMy Profile

    • DividendDeveloper March 14, 2015 at 3:32 PM

      No problem, glad it was useful.

  7. JC March 13, 2015 at 7:45 AM

    I recently did my own analysis of TROW and liked it so much that I purchased some shares. I want to take a look at BLK because I’ve heard good things about them as well. Thanks for the heads up comparison between TROW and BEN.
    JC recently posted…Why T. Rowe Price Group, Inc. Is At The Top Of My Watch ListMy Profile

    • DividendDeveloper March 13, 2015 at 8:12 AM

      No problem, hope you found it useful.

  8. No More Waffles March 15, 2015 at 8:13 AM

    Dividend Developer,

    Great analysis and comparison of both stocks! From what I’ve gathered I wouldn’t mind owning both of them, although I believe TROW is a (slightly) better investment at the moment.

    Good job once again.

    Keep it up,

    PS: love your new layout, very clean.
    No More Waffles recently posted…Net Worth Update: €58,694 (+4.44%)My Profile

    • DividendDeveloper March 15, 2015 at 11:10 AM

      Exactly. Thank you!

  9. DivGuy March 16, 2015 at 12:10 PM

    Between two good stocks, like it’s the case here, I always tend to choose the one with higher dividend growth rate. However, TROW is probably of a higher quality generally speaking. Solid company with great numbers. Great comparison!

    BTW, I like the new layout!


    DivGuy recently posted…Day#4 How to Proceed with Your First TradesMy Profile

    • DividendDeveloper March 16, 2015 at 12:47 PM

      Sounds like a pretty fair way to break a tie. I think it’s a bit more complicated due to frequent special dividends with these two. Sans that, TROW wins since its Chowder number is 2 points higher than BEN’s, with a higher dividend yield too. Thanks!

  10. Pingback: Dividend Reads for the weekend | The Dividend Guy Blog

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