Thursday, November 17, 2005
Northern Trust hiked its dividend 9.5% today. That was about in line with estimates, though a bit lower that our model was predicting. Northern Trust derives 75% of its earnings from fees, most of which come from wealth management. They have a unique franchise and brand in the money management business: they do business with the super wealthy. They have it down to a science because all banks know what they are doing and, yet, no other bank has been able to duplicate Northern's success. Lots of rumors are constantly circulating about a bigger bank buying NTRS, but there are at least three reasons why NTRS will likely remain independent. 1. They are growing rapidly and few other banks could offer them stock that would have the growth potential as does NTRS's stock; 2. They are not cheap; and 3. They don't want to sell out. No matter, we think they are just fine on their own. In our judgment they have the most focused, most understandable strategy of any bank in the US. When, as, and if the stock market regains its uptrend, NTRS is a huge benefactor. They have solid organic growth, and a rise in stock prices would give them an added boost. NTRS is in our Blue Chip Growth Portfolio. We rate Nothern Trust's dividend hike, neutral.
Labels: Company Discussion