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Waddell & Reed Has A 5.9% Dividend Yield, But Is It A Value Stock Or A Value Trap?

Published Mon, 11 Feb 2019 21:46:53 -0500 on Seeking Alpha

Overview and Thesis
In this article, I discuss Waddell & Reed Financial Inc. (WDR), an investment advisory and asset management firm. The company has an above market average dividend yield of 5.9% due to an almost 80% decline in stock price since its peak in early 2014. The current PE ratio is 7.4, almost half of its 10-year average and below the average of the S&P 500. Furthermore, the balance sheet has a net cash position, hardly the sign of a company in financial distress. However, Waddell & Reed is facing significant challenges in its asset management business, reflecting broader industry trends, changes in investor behavior and even more importantly company missteps including poor fund performance. Despite the perceived undervaluation and attractive dividend yield I outline below why small investors should not take a position in the company.
Source: bizjournals.com
Waddell & Reed’s Core Business Is Its Actively Managed Mutual Funds
Waddell & Reed is an investment services provider that was founded in 1937. The company offers investment advisory and asset management services to individuals and institutions. The company had roughly $65B in assets under management (AUM) at the end of Q4 2018. Waddell & Reed derives the majority of its revenue from investment management fees, underwriting and distribution fees, and shareholder service fees. The core of the business is Waddell & Reed’s product portfolio of mutual funds and a handful of... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
STATE STREET 60.27   10.9 5.51 1.88 3.20
BLACKROCK 434.75   16.5 26.34 13.20 3.08
T. ROWE PRICE GROUP 118.12   14.9 7.95 3.04 2.58

STATE STREET - STT
STATE STREET - STT  


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