Today I added to my existing position in Blackrock (BLK).  BLK is an investment management firm, and thus is part of the Financial sector of the market.

You may be most familiar with BLK as a result of its Exchange Traded Funds (ETFs), and its iShares brand.  iShares dominate the ETF market.

BLK primarily provides its services to institutional, intermediary, and individual investors including corporations, the public, unions, and insurance companies, among others.  BLK also offers risk management and advisory services.

BLK manages equities, bonds, balanced funds and alternative investments such as hedge funds.  Equities and bonds comprise the majority of the assets under management (AUM), with equities at 58% and bonds at 32%.  Amazingly, AUM is approaching 6 trillion dollars, with over 70% of that being comprised of index funds.

One downside to being so heavily involved in index funds is that the fees associated with index funds are often much less than those obtained from actively-managed funds.

Management fees have been on the decline over the years, and while this is good for us individual investors, it can be problematic for asset managers like Blackrock.

BLK’s stock price started trending down earlier this year.  Fund outflows have occurred in the first couple of quarters of 2018 as both institutional and retail investors have pulled some money out of the market in response to the rise in volatility.

Recently, a couple of news items have helped to further depress the stock price of BLK.

Earlier this month, Fidelity announced it would launch two index funds that carry zero fees.  This news knocked down the stocks prices of many asset managers, as investors feared that other firms would have to follow suit, reducing their profits.  However, the head of U.S. iShares said BLK didn’t have any plans to introduce zero-fee funds.  Most of BLK’s investment fees come from institutional traders rather than individual ones, and the revenue from the institutional side is not as sensitive to price competition.

Within the past week, and seemingly coming to a head today, more negative news surfaced with regard to the currency crisis in Turkey.  Apparently, BLK is large foreign holder of Turkish government bonds, and thus investors are concerned BLK might incur some significant losses related to these holdings.

I saw the price declines leaving me with a possible good point to add to my existing position.  Average earnings growth of 12% a year in the near future seem realistic for BLK.  Add in a dividend yield in the 2%-3% range and I’m hoping to see average annual returns close to 15%.

Let’s take a look at my purchase details…

 

BLK

On Wednesday, 8/15/18, I purchased 4 shares at $468.25/sh, for a total of $1,875.00 after commission.

This is essentially a 25% increase in my position, and brings my total share count to 20.014 shares.

My original BLK purchase was about 3 years ago at a price of $293.02/sh.  As you can see, BLK has treated me well over the past 3 years.

This additional purchase brings my BLK cost basis up to $334.39.

BLK shares were yielding ~2.67% at my recent purchase price, basically right at my Portfolio average.

This purchase results in an additional $50.08 in annual forward dividend income, bringing my annual forward dividend income to ~$8,664.

BLK is slated to go ex-dividend in about 3 weeks, so my September dividend payment will include dividends from the shares acquired with this purchase.

 

Here’s a look at the dividend growth history for BLK, dating back to the year 2003 when the company initiated a dividend.

BLK has raised their dividend for 9 years in a row now, if you include 2018.

In fact, BLK has already raised their dividend twice in 2018.  The first raise of the year (January) was 15.2%, with the second raise (July) being 8.68%.  Gotta love that!

As you can see, BLK has very solid short-term and long-term dividend growth rates.

In addition, the payout ratio is at a desirable 45%, leaving room for future dividend increases.

 

Hopefully, I took advantage of a price decline that resulted from some short-term headwinds, and added at a good time.  Time will tell.

 

I don’t see BLK in too many portfolios.  Has it ever been on your watchlist?  What do you think of a stock with a large share price like BLK?  Does this deter you from looking at the company as a possible investment?  I look forward to your comments!