BlackRock Inc. (NYSE: BLK)
BlackRock manages investments for clients around the globe, and the company’s massive amount of assets under management (AUM) makes it the world's largest asset manager, ahead of Vanguard Group, UBS Group, and Fidelity Investments. Blackrock was founded by Larry Fink (current CEO) in 1988 and is based in New York City. Having recently released earning reports, Blackrock has caught investors' attention and has seen an increase in mentions by 140% over the last day, prompting them to wonder what makes Blackrock such a good investment. Currently, Blackrock shares trade at $639.95 per share.
Being an industry leader, it’s no surprise that Blackrock comes off as a good investment. Here are some of the reasons why.
Blackrock has lifted the dividend yield up to 3.4% and with the company's dividend payout ratio set to top out at 54.4% in 2022, dividend growth should be in the high-single-digits each year moving forward.
In addition, the company is repurchasing shares (with $500 million in buybacks in the last quarter) which only makes it more appealing.
BlackRock's trailing-12-month price-to-sales ratio of 4.6 is moderately lower than the 10-year median of 5.2. After the sell-off, it now trades at a very reasonable 17 times earnings.
Shares of BlackRock, the world's largest asset manager, are down 35% from their 52-week high, making this the perfect time to buy shares.
Even with a rough 2022 in store, analysts are forecasting 6.5% annual earnings growth for BlackRock over the 2021 earnings per share base of $39.18.
However, the company is still doing well from a long-term viewpoint. From 2011 through 2021, BlackRock has seen its AUM nearly triple, growing at a compound annual growth rate of 11%.
In the second quarter, the company saw net inflows of $90 billion, with $79 billion flowing into its index and ETF products.
Global ETF AUM was $8 trillion in 2020, but BlackRock thinks ETF penetration of the total equity and bond markets is still low and projects this AUM to grow to $15 trillion by 2025.
About one-third of the company's AUM is from outside of the U.S. and Canada, and it is focused on expanding in the Asia-Pacific region, which could prove to be lucrative over time.
Although Blackrock seems like a good investment, it isn’t perfect. Here are two reasons why it might not be the best time to buy the stock.
BlackRock saw revenue decrease by 6% during the quarter, while its diluted earnings per share (EPS) fell by 21%.
In addition, its AUM dropped 11% from last year to $8.5 trillion (however in January 2022 it hit a record of $10 trillion).
The threat of an upcoming recession has pushed BlackRock's AUM down in recent months, which will lead to decreased net revenue since the company's investment advisory fees are tied to its AUM. However, the company still pays great dividends and is set to conquer the industry when economic conditions get better, making the currently low price seem like a good chance to take a position in Blackrock.
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