Citi Comments On Blackrock Following Recent Dividend Increase

Post 2/24 market close, Blackrock BLK announced a 37.5% increase in the quarterly dividend to $1.375, and will be payable to shareholders of record on 3/23. The dividend is consistent with Citi's $1.35 forecast and translates into an above-average pro forma 2.7% annualized yield vs. median 1.7% yield for traditional managers. This supports Citi's above average FCF leverage thesis and should bolster the stock's relative appeal, recent peer increases range from 5% to 15%; sends strong signal around prospective earnings power/persistency, in Citi's view; and, 3) most importantly strikes a balance between attractive yield and warehousing liquidity to support buyback, with 50% of Barclay's ~20% stake now no longer locked up. Blackrock catalysts include: possible SPX inclusion; potential Barclay's ownership shares buyback. Citi sees potential for 5% to 15% accretion; and, further AUM share gains. Interestingly a 2% dividend yield, or more in line to peers, triangulates to $270 stock price, supportive of our current valuation work. Citi has a $250 PT and Buy rating on BLK BLK closed Thursday at $201.20