Charles Schwab Corp

As Charles Schwab Corp's earnings have slowed over the last few years, so has its share's meteoritic rise higher. Despite this rise, the company's dividends have remained stagnant for the last six years. The result has been that as revenues and earning have continued to increase, the payout ratio has continued to fall. Today it's sitting at the lowly level of only 23%. I expect Charles Schwab to once again start increasing its dividend and that dividend could easily double over the next few years. 
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The Charles Schwab Corporation provides wealth management, securities brokerage, banking, money management, custody, and financial advisory services. The company operates through two segments, Investor Services and Advisor Services. The Investor Services segment provides retail brokerage and banking services, retirement plan services, and other corporate brokerage services; and stock plan services, compliance solutions, and mutual fund clearing services, as well as engages in the off-platform sales business. The Advisor Services segment provides custodial, trading, and support services; and retirement and corporate brokerage retirement services. The company provides brokerage accounts with cash management capabilities; third-party mutual funds through the Mutual Fund Marketplace, including no-transaction fee mutual funds through the Mutual Fund OneSource service, which includes proprietary mutual funds, plus mutual fund trading, and clearing services to broker-dealers; exchange-traded funds (ETFs), including proprietary and third-party ETFs; and advice solutions, such as managed portfolios of proprietary and third-party mutual funds and ETFs, separately managed accounts, customized personal advice for tailored portfolios, and specialized planning and portfolio management. It also offers banking products and services, including checking and savings accounts, certificates of deposit, first lien residential real estate mortgage loans, home equity loans and lines of credit, and Pledged Asset Lines; and trust services comprising trust custody services, personal trust reporting services, and administrative trustee services. The company serves individuals and institutional clients in the United States, the Commonwealth of Puerto Rico, London, and Hong Kong. The Charles Schwab Corporation was founded in 1971 and is headquartered in San Francisco, California.
(Summary) (Company) (Chart)

7 April 2016
Price $26.39
1yr Target $31.59
Analysts 16
Dividend $0.24
Payout Ratio 23.30%

1yr Cap Gain 19.70%
Yield 0.90%
1yr Tot Return 20.60%
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P/E 25.67
PEG 1.21
Beta 1.60
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EPS (ttm) $1.03
EPS next yr $1.54
EPS next 5yr 21.26%
1yr Price Support $32.74

​Market Cap $34.43 Bil
Revenues $6.50 Bil
Earnings $1.36 Bil
Profit Margin 20.92%

Quick Ratio ---
Current Ratio ---
Debt/Equity 11.09

1yr RevGR 5.31%
3yr RevGR 9.22%
5yr RevGR 8.47%

1yr EarnGR 8.42%
3yr EarnGR 14.13%
5yr EarnGR 22.07%

​1yr DivGR 0.00%
3yr DivGR 0.00%
5yr DivGR 0.00%

ROA 0.80%
ROE 11.70%

​Background.

​In 1963, Chuck Schwab and three other partners launched Investment Indicator, an investment newsletter. At its height, the newsletter had 3,000 subscribers, each paying $84 a year to subscribe.

In April 1971, the firm incorporated in California as First Commander Corporation, a wholly owned subsidiary of Commander Industries, Inc., to offer traditional brokerage services and publish the Schwab investment newsletter. In November of that year, Schwab and four others purchased all the stock from Commander Industries, Inc.

In 1972, Schwab bought all the stock from what was once Commander Industries. In 1973, the company name changed to Charles Schwab & Co., Inc. 

In September 1975, Schwab opened its first branch in Sacramento, California, after offering discount brokerage from May 1, 1975.

In 1977, Schwab began offering seminars to clients.

By 1978, the company had 45,000 client accounts total, and the number grew to 84,000 in 1979.

In 1980 Schwab established the industry’s first 24-hour quotation service, and the total of client accounts grew to 147,000.

In 1981 Schwab became a member of the NYSE, and the total of client accounts grew to 222,000.

In 1982, Schwab became the first firm to offer 24/7 order entry and quote service. It opened its first international office in Hong Kong, and the number of client accounts totaled 374,000.

Today the company serves more than 8.2 million client brokerage accounts with more than $1.65 trillion in assets from over 300 offices in the U.S., Puerto Rico, London, and Hong Kong.

​My Perspective

Owning shares of any brokerage house is tempting if only to get back some of the many thousands of dollars that were spent on commissions over the years. But looking at the fundamentals of Schwab isn't causing me to jump into a position at this price. While an estimated 5 year EPS growth rate can support a price near $32 next year, the stock chart tells me that I may be able to buy these shares at a price a few dollars lower than where it sits today. And a beta of 1.6 tells me that the stock's inherent volatility may just provide a lower price in the near future.

While I don't expect the dividend yield to increase to 2% anytime in the near future, a pullback of just a few dollars in conjunction with potential future dividend increases would go a long way to make this a very nice investment. 

I believe that as the wealth and number of investors increases in the future, the value of investment advice will also increase. I'll be starting a position in this company as the price pulls back below $24 per share and the yield rises above 1%.