Franklin Resources, Inc.
) announced a 3-for-1 stock split plan which will be paid as
stock dividend on Jul 25, 2013 to common stockholders of record
as of Jul 12, 2013. Moreover, a quarterly cash dividend of 29
cents per common share will be paid on Jul 8, 2013 to
stockholders of record holding shares of common stock as of Jun
24, 2013. The quarterly dividend reflects a 7% rise over the
prior-year quarterly dividend.
FRANKLIN RESOUR (BEN): Free Stock Analysis
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Due to the split, the shareholders will get 3 shares for holding
1 and therefore, the number of outstanding shares of Franklin's
common stock will be increased to 634.8 million from
approximately 211.6 million as of Mar 31, 2013. However, the
share price of the stock would be reduced to one-third of its
We believe Franklin undertook the stock split plan as its share
price is too high compared with other investment managers -
Legg Mason Inc.
Federated Investors, Inc.
) in the same sector. This high price is making its shares less
attractive to investors.
Through stock split companies make shares look more reasonably
priced to small investors, though the underlying value of the
company remains constant. A reasonable price attracts investments
in such stocks, which boosts share price in the market. Further,
such moves by the companies increase marketability and liquidity
of stocks in the market.
The move undertaken by Franklin marks the strength in its
business model, reflecting the company's commitment to return
value to shareholders coupled with its strong cash generation
capabilities. We believe that through the stock split, investors'
sentiments will be positive in the near term. Currently, Franklin
carries a Zacks Rank #3 (Hold).