Broadridge: “A True Monopoly”

The Financial Times profiles Broadridge Financial Solutions (BR). The FT calls them “an obscure but lucrative Wall Street utility.” That sounds about right. They note that Broadridge holds a market share of 80%, and that’s not sitting well with some mutual funds.

The New York Stock Exchange regulates fees for investor communications, setting a cap of 25 cents a report. Broadridge charges the full 25 cents for an email, according to analysts. It costs more than for paper mailings because of a 10 cent fee that Broadridge charges to review whether shareholders prefer email over paper, according to the company.

The fees vastly exceed the cost, according to the Investment Company Institute, a trade group for the fund industry in Washington. For investor accounts not held through a broker, a typical fund paid 5 cents to send a shareholder report by either email or paper mail exclusive of postage, ICI said.

(…)

The payrolls company Automated Data Processing spun off Broadridge in 2007. In the fiscal year ended June 30, Broadridge reported a record $5bn in revenue and $902m in adjusted operating income, equal to an operating profit margin of 18 per cent.

Most of the company’s revenues and profits derive from the Broadridge “investor communication solutions” business, which includes organising virtual shareholder meetings and votes, an area that was increasing in popularity even before the pandemic and has since boomed.

In 2019 it handled more than 90 per cent of proxy voting services for public companies and mutual funds in the US, according to the company, whose annual report states, “We operate in a highly competitive industry.”

Broadridge recently said it made $2.19 for its fiscal Q4. That matched Wall Street’s consensus. That was a 13% increase over the same quarter last year. Full-year EPS was $5.66. That’s up nicely from $5.03 per share last year.

The company increased its quarterly dividend from 57.5 cents per share to 64 cents per share. That’s an increase of 11.3%. This is Broadridge’s 15th annual dividend increase in a row. In eight of the last nine years, the dividend has increased by double digits.

For the coming year, Broadridge expects earnings growth of 11% to 15%, recurring-revenue growth of 12% to 15% and operating margins around 19%. That translates to earnings for this year of $6.28 to $6.51 per share.

Posted by on August 25th, 2021 at 12:15 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.