BlackRock (NASDAQ:BLK) offers something for all investors — value, a growing dividend, and even exposure to the crypto market’s long-term growth. I’m bullish on BlackRock based on its dominant position in financial markets and its stature as a leader in the burgeoning crypto market. Plus, I like the stock’s below-market valuation and strong dividend growth.
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Dominant Player
With $10.5 trillion in assets under management (AUM) as of its most recent quarter, BlackRock is the world’s largest asset manager, offering products across equity strategies, fixed income, alternatives, and more. BlackRock serves both institutional and retail clients in over 100 countries.
Its massive size gives it significant competitive advantages. For example, it can offer investors low fees on many of its investment products, giving it a scale advantage over smaller competitors who have to charge higher fees to be financially viable.
While many traditional asset managers struggle with the rise of index investing (which comes with lower fees due to the lack of need for active management), BlackRock has thrived. Innovatively leading this trend, passive products now account for the majority of its revenue.
Its low fees and passive nature make BlackRock a dominant player across various asset classes, and its well-known iShares ETFs are good examples, as these are some of the largest ETFs in today’s stock market.
For instance, the iShares Core S&P 500 ETF (NYSEARCA:IVV) is the second-largest ETF out there with just under $500 billion in AUM, and there are plenty of other heavy hitters within the iShares family of funds, whether it’s the iShares Core MSCI EAFE ETF (BATS:IEFA) (with $118.2 billion in AUM) or the iShares Core Aggregate U.S. Bond ETF (NYSEARCA:AGG) ($108.8 billion), among others.
A Smart Way to Gain Crypto Exposure
BlackRock is also a smart way to gain exposure to the growth of the cryptocurrency industry and a major beneficiary of the rise of crypto, given the way that the firm has positioned itself as a heavyweight in the space.
BlackRock leveraged its blue-chip reputation, size, scale, and marketing prowess to make its Bitcoin (BTC-USD) ETF, the iShares Bitcoin Trust (NASDAQ:IBIT), an unprecedented success. Since launching in January, IBIT has amassed a remarkable $18.4 billion in assets under management (AUM). IBIT reached $10 billion in AUM in just 37 days, making it the fastest ETF to ever achieve this milestone. The remarkable success of IBIT shows the power of the BlackRock machine at work.
BlackRock has also filed for a spot Ethereum (ETH-USD) ETF, and given the success of IBIT, it seems likely that BlackRock’s entry will be one of the leading vehicles in this space, if not the dominant player, as well.
As cryptocurrency grows in popularity, BlackRock is well-positioned to benefit from this trend by offering institutional and retail investors ETFs and other products that provide exposure to assets like Bitcoin and Ethereum. These ETF forms may be preferable for many investors due to reasons including familiarity, convenience, security, and regulatory considerations.
It’s important to note that today, crypto makes up just a small portion of BlackRock’s business. But that also makes it a smart way for investors to gain access to the space. It has plenty going for it without crypto and doesn’t need it to succeed, so the downside presented by its crypto exposure is fairly limited, but the potential upside is significant.
Below-Market Valuation
Despite its dominant business model and appealing long-term growth prospects, BlackRock trades at a reasonable multiple of 19.3 times consensus 2024 earnings estimates. While this won’t necessarily make BlackRock a surefire value stock in the eyes of traditional value investors, it’s a reasonable multiple that is well below the market average. The S&P 500 (SPX) currently trades at 24.2 times earnings and 22.7 times forward earnings.
This reasonable multiple leaves plenty of room for upside on the table for investors while perhaps adding a bit of downside protection in a turbulent market.
Growing Dividend
In addition to this reasonable valuation, BlackRock also offers investors a decent dividend payout with a yield of 2.6%. As is the case with value investors, this isn’t necessarily a yield that will get income investors excited, but it is far higher than the average yield for the S&P 500, which currently stands at just 1.3%. Plus, this dividend helps add to the stock’s total returns over time.
BlackRock is also a compelling dividend growth stock. Not only has it paid a dividend for 20 straight years, but it has grown its dividend for 14 years in a row at a 9.5% compound annual growth rate (CAGR) over the past five years.
As the company continues to grow and increase its earnings over the years, I expect it to continue to increase its dividend payout over time, making the stock’s future yield-on-cost much higher for investors who are buying the stock at current levels.
Is BLK Stock a Buy, According to Analysts?
Turning to Wall Street, BLK earns a Moderate Buy consensus rating based on 11 Buys, two Holds, and zero Sell ratings assigned in the past three months. The average BLK stock price target of $911.75 implies 2.3% upside potential from current levels.
Investor Takeaway
I’m bullish on BlackRock based on its dominant position as a market leader in asset management and its potential to continue benefiting from the growth of the crypto market now that it has established itself as a key player in the space. Additionally, its reasonable valuation and its annually growing dividend further bolster my positive outlook.
