This solutions-based firm has a lock on publicly traded companies' need for online voting and proxy services, and it kicks off a nice dividend to boot, writes Pat McKeough of TSI Network.
Broadridge Financial Services (BR) gets 70% of its revenue from its Investor Communication Solutions division, which distributes proxy materials such as ballots to investors in stocks and mutual funds. It also counts the votes.
Broadridge’s ProxyEdge software helps centralize and simplify shareholder voting, particularly in meetings involving multiple ballots. The company mails and processes material for 60% of proxy votes worldwide.
The remaining 30% of its revenue comes from Securities Processing Solutions. This division offers transaction-processing services that automate many functions in stock trading: taking and executing orders, confirming trades, settlement, and accounting. The company also provides outsourced record keeping to the financial industry, including services that help clients meet their increasingly complex regulatory compliance needs.
Since it became a public company in 2007, Broadridge has spent $460 million buying other firms. It has also sold various businesses. That’s the main reason why its annual revenue has stayed around $2.2 billion for the past five years.
The costs of integrating new businesses and writedowns cut Broadridge’s 2012 earnings to $125 million, or 98 cents a share. Without these items, Broadridge would have earned $198 million in fiscal 2012, up 12% from $176.8 million in fiscal 2011. Earnings per share gained 13.1%, to $1.55 from $1.37.
As well, Broadridge recently finished moving its data center to IBM (IBM) under an outsourcing contract that expires in June 2022. This deal should save the company roughly $25 million a year.
The company has increased its dividend each year since it began trading. The current annual rate of 72 cents a share yields 3%.
Broadridge should earn $1.70 a share in fiscal 2013, and the stock trades at 14.1 times that forecast. That’s a reasonable P/E ratio for an industry leader that stands to gain from increasingly complex securities regulations.
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