Investors appreciate the company’s payouts
Stock: AllianceBernstein Holding LP (NYSE:AB)
AllianceBernstein Holding LP currently has a very juicy 8.5% dividend yield with trailing 97% payout ratio, and 11.3 times price-earnings ratio.
The $2.3 billion New York-based asset manager appears to have very generous dividend amount compared to the broader S&P 500 index’s 1.89% and 10-year Treasury rate of 2.254%.
According to filings, AllianceBernstein provides research, diversified investment management, and related services globally to a broad range of clients through its three buy-side distribution channels: Institutions, Retail and Private Wealth Management, and its sell-side business, Bernstein Research Services.
The asset manager’s principal source of income and cash flow is attributable to its investment in AB limited partnership interests. AllianceBernstein has 34.8% interest in this partnership as of June 2017.
**This article consists of the company’s operations and figures. For quicker reading jump ahead to the conclusion part.**
Interesting fact about the asset manager is that it records only its equity in net income attributable to AB Unitholders. In the recent six months, its income fell 6.9% lower to $97.6 million and a contrasting 7.1% rise in profits to $11.96 million in profits brought by lower taxes.
AllianceBernstein also grew its assets under management by 5.5% year over year to $516.6 billion.
In the past three years, AllianceBernstein registered revenue growth average of 9.4%.
AllianceBernstein’s total liabilities fell $72 million while total capital decreased by $99.4 million.
Despite lower profits in the period, AllianceBernstein’s cash flow from operations increased by 23% year over year to $108.8 million brought by higher cash distributions received from its partnership interest.
In recent years, AllianceBernstein has provided most all of its cash flow in dividends.
AllianceBernstein appears to be a well-seasoned asset manager having traced its origins back in 1967. The company has exhibited reliable dividend payouts in the past decade, and the increasing assets under management may further support this trend. Up 11.4% this year compared to the broader S&P500’s 13.43 gains exhibits the near comparison performance of AllianceBernstein plus the hefty dividends.
Meanwhile, one can have a hard time deriving share price using dividend growth and payouts given the company’s varying payouts.
Despite its current juicy dividend yields, AllianceBernstein would further be a very attractive buy given any 5-10% pullback vs. its current share price of $24.5.
Seth P. Bernstein, President and CEO of AB (second quarter)
“It’s clear that I’ve joined AB at an exciting point in the firm’s long-term strategic and competitive transition.”
“AB’s momentum accelerated in the second quarter, with 11% year-on-year gross sales growth, active net inflows of $6.6 billion that were positive across all three client channels, 270 points of adjusted operating margin expansion and 26% growth in adjusted earnings per unit.”
“AB’s strategy to maintain a laser focus on investment performance, broaden our global presence, consistently deliver relevant services to our clients and remain vigilant in improving our financial position is the right one, and after years of relentless execution, our steady progress is coming through in the results. Investment performance remains stellar across the fixed income franchise and equity track records keep trending upward. In Retail, gross sales remained at record levels during the quarter, driven by strength in our preeminent Asia ex Japan fixed income franchise, where first half gross sales increased 65% year-on-year and net flows totaled more than $4 billion. In Institutional, we were pleased to see a recovery in activity levels from the first quarter. Gross sales rose 60% sequentially and inflows of $1.2 billion returned to positive territory. We’re particularly encouraged by the positive trend in our pipeline fee rate. We’re winning more mandates in higher fee areas like commercial real estate debt and concentrated active equities – demonstrating the success we’ve had in diversifying our product set. As a long-time personal client, I knew the Bernstein Private Wealth business well coming in, but I didn’t fully appreciate how effective we’ve been in recent years in appealing to larger and more sophisticated clients with our offering. The suite of targeted services, which has $5.5 billion in commitments today, has been instrumental in this effort. On the sell side, I was well aware coming in of Bernstein’s reputation for differentiated institutional research. Now I see how well this business is navigating shrinking trading volumes and fee compression in the US and the MiFID II rollout in Europe, while expanding our research and trading presence in faster-growing international markets. Finally, AB has done impressive work to improve our financials, in particular continuing a five-year trend of margin expansion so far in 2017. The second quarter adjusted margin of 25% was up 270 bps year-on-year, and adjusted earnings per unit of $0.49 were up 26%.”
“Spending time with my new colleagues here has confirmed what I knew coming in: AB is full of brilliant and talented people who are striving to deliver for clients – and succeeding in creating better outcomes for them. It’s an honor to be at the helm of such a great firm, and I’m looking forward to doing what I can to build upon AB’s success from here.”
Disclosure: I do not have shares in any of the companies mentioned.