Dividend Detective – Fiducian Portfolio Services

Thursday, October 27th, 2011

The following Dividend Detective by Adrian Ezquerro featured in The Australian on 27 October 2011.

Fiducian Portfolio Services (ASX:FPS) provides a wide range of financial services including funds management, financial planning, portfolio administration and business services.

Share price: $1.15
Industry: Diversified Financials
2011 Dividend: 9.75 cents (fully franked)
Forecast 2012 Dividend: 10 cents (fully franked)

FPS recently announced a solid result, with profit up 8% to $4.4m. Management noted that “uncertain geo-political events around the world and Australia, along with volatile financial markets have not been conducive to promoting conditions for stronger profit growth.”

The company’s national network of franchised and salaried financial planners continues to grow whilst funds under administration grew marginally to $1.15 billion.

Fundamentally the business remains very sound. The balance sheet is strong with $10.15m in cash and no debt. FPS has exhibited good levels of profitability, again achieving normalised return on equity exceeding 30% for 2011. Operating cash flow was also good at $5.1m.

Management currently own over 32% of the company. This provides a good level of vested interest for management to continue to act in the best interests of all shareholders.

An on-market buy back has been in operation for some time and is continuing. Regarding capital management, managing director Indy Singh commented that their strategy for the next financial year is to “utilise profits to pay dividends and to use any surplus to support meaningful acquisitions or make further buy backs”.

FPS recently declared a fully franked dividend of 5 cents per share.

FPS is a small-cap stock and as such has a moderate risk profile. The MyClime valuation is currently $1.45 and purchase at the current market price would present an investor with an attractive yield approaching 9% fully franked.

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