The Charles Schwab Corporation

No one reading this article needs an introduction to the The Charles Schwab Corporation. In fact many readers of this article may already have an account with them and actively trade using their website. So the point of this article is to determine if an investment in Schwab fits my personal style of investing and whether anyone using their site to trade has the possibility of making money trading shares of a company that they may be charging them commissions. That would be a really sweet deal.

​The Charles Schwab Corporation provides wealth management, securities brokerage, banking, asset 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)

26 March 2017
Price $40.02
1yr Target $46.27
Analysts 15
Dividend $0.32
Payout Ratio 24.42%

1yr Cap Gain 15.61%
Yield 0.79%
1yr Tot Return 16.40%

P/E 30.60
PEG 1.51
Beta 1.66

EPS (ttm) $1.31
EPS next yr $1.97
Forward P/E 20.36
EPS next 5yr 20.24%
1yr Price Support $39.87

Market Cap $53.63 Bil
Revenues $7.64 Bil
Earnings $1.75 Mil
Profit Margin %

Quick Ratio ---
Current Ratio ---
Debt/Equity 12.20

1yr RevGR 17.21%
3yr RevGR 11.10%
5yr RevGR 9.77%

1yr EarnGR 27.18%
3yr EarnGR 18.66%
5yr EarnGR 13.35%

1yr DivGR 20.83%
3yr DivGR 6.44%
5yr DivGR 3.85%

ROA 0.80%
ROE 13.40%

Charles Schwab Monthly Chart

Charles Schwab Dividend History

My Path Forward

​The Charles Schwab Corporation recently dropped their commissions to $4.95 per trade to the jury's out on the affect that'll have on the bottom line. While initially one would think that would reduce sales but if it brings in more accounts, sales will increase. So only time will tell the affect that has on the company's fundamentals. 

Looking at the historical fundamentals above, it appears that this is a rock solid company that's a little bit pricey. I normally like to buy shares of companies that are about 20 times earnings. In the case of Charles Schwab, the price is now 20 times next year's earnings. But that may be the best I can do for a company that has these great fundamentals. 

A couple of things that I've noticed and I'd like to point out are the revenue, earnings and dividend growth rate and the payout ratio. Revenues and earnings have been increasing at a nice clip while dividends have been held constant for the last few years at around $0.12 per share. That's resulted in the payout ratio to dropping to only 24% of earnings and if it's not raised significantly the payout ratio will quickly fall to 16%. So I think the possibility of dividend increases is pretty high. 

So all things considered, I'd like to buy these shares in the $30s but the stock has already fallen from the mid-$40s so I think I'll begin a very small position in the next few days and buy more if it falls below $40 per share. If it doesn't pull back, I'll slowly accumulate shares on dips as funds become available. In addition, I'll use dividend reinvestment as well as the sale of call options to help me accumulate more shares without having to use my own funds.