Federated Investors (FII) provides investment advisory, administrative and other services and products to its mutual funds (primarily money market funds) and separate accounts. It manages over $358 billion in assets spread among 135 mutual funds. The company earned an impressive 25-35% return on equity and grew profits and dividends at a 7-15% pace over the last 10 years. This record should continue, considering:
- the company’s business mix allows for less volatility in diverse markets, and its investment process meets the requirements of most fiduciaries;
- the long-term performance of its funds is above average;
- acquisitions.
Negatives:
- it has a large exposure in money market funds, which are experiencing very high redemptions,
- the gross yield on its money market funds are insufficient to cover costs, with the result that it is waiving many of these fees,
- rising executive compensation.
FII is rated A by Value Line, has a 40% debt-to-equity ratio, and its stock yields 3.6%.
Statistical Summary:
Stock Yield | Div. Growth Rate | Payout Ratio | No. Increases Since 2001 | |
FII | 3.6% | 7% | 58% | 8 |
Industry Avg. | 1.5% | 4% | 26% | N/A |
Debt/Equity | ROE | EPS Down Since 2001 | Net Margin | Value Line Rating | |
FII | 40 | 30% | 5 | 17% | A |
Industry Avg. | 3 | 15% | N/A | 15% | N/A |
Note: FII stock made decent progress off its March 2009 low, surpassing the downtrend off its January 2008 high (straight red line) and the November 2008 trading high (green line). FII is in a long-term trading range; the blue line is the lower boundary. Intermediate term, it is in an uptrend (purple lines), although it may be challenging the lower boundary soon. The wiggly red line is the 30-day moving average. The Dividend Growth and High Yield Portfolios own a full position (partly as a result of a trading sale at $25 and repurchase at $18). Shares would be Added at current levels ($18-19); the lower boundary of its Sell Half Range is $35.
