Dividend Growth Stock Overview: Jack Henry & Associates, Inc.

Jack Henry & Associates provides software and hardware that helps banks and
credit unions serve their customers. 
Photo courtesy GotCredit/flickr.com.

About Jack Henry & Associates

Jack Henry & Associates provides information technology and processing services to small to mid-size banks and credit unions. The company is headquartered in Monett, Missouri and employs nearly 5,500 people. Jack Henry & Associates was founded in 1976 and currently serves over 11,300 clients.

The company focuses its business on three distinct brands: Jack Henry Banking, Symitar and ProfitStars.

Jack Henry Banking provides data processing systems to more than 1,200 small and mid-size banks with individual assets up to $30 billion, which represents 17.6% of the total market of 6,800 small and mid-tier banks (according to the FDIC). Jack Henry Banking assists its client banks to provide services to their retail and business clients, along with supporting internet banking, electronic funds transfers and bank management.

The Symitar brand provides similar services as the Jack Henry Banking brand, but to credit unions rather than banks. Symitar has 780 credit union customers. The ProfitStars brand provides specialized products and services to other financial services. The revenue is smaller than the other two brands, but across far more customers, with ProfitStars serving 10,800 domestic and international customers. ProfitStars provides complimentary information technology platforms and services to assist clients to grow revenue.

Across all three brands, Jack Henry & Associates generates revenues through several sources, including initial software licensing fees and ongoing annual software maintenance fees, reselling hardware to support the proprietary Jack Henry software, and associated services like installation, training and ongoing support. The company also generates revenues by providing outsourcing services to clients, rather than having the client operate the Jack Henry software and hardware internally. While the company sells products and services internationally, including in Europe, South America and the Caribbean, international revenues are only about 1% of total company revenues.

In fiscal year (FY) 2015 (which ended June 30, 2015), Jack Henry & Associates generated income of $211.2 million on revenues of $1.26 billion, figures which were up 13% and 7%, respectively. The vast majority (96%) of the revenue came from providing ongoing support and services to Jack Henry customers. Earnings per share were $2.59, up 18.3% in FY2015. This gives the company a payout ratio of 38.6% based on the current annualized dividend rate of $1.00.

The company has an active share repurchase program; in May 2013, Jack Henry’s board authorized the buyback of 25 million shares. The program has no expiration date and 5.2 million shares remain on the program, representing about 6.4% of the outstanding shares.

Jack Henry & Associates is a member of the S&P Mid Cap 400 index and trades under the ticker symbol JKHY.

Jack Henry & Associates’ Dividend and Stock Split History

Jack Henry & Associates Dividend History

Jack Henry & Associates has more than doubled its dividend payout every 5 years for 20 years.

Jack Henry & Associates began increasing dividends in 1991. It has increased dividends year-over-year (based on calendar years) annually except for in 2003. (Jack Henry & Associates is part of David Fish’s Dividend Contenders list based on the company’s fiscal year dividends.) The company traditionally announces annual dividend increases in mid-February, with the stock going ex-dividend at the end of February. I expect the company to announce it’s 25th year (based on the company’s fiscal year, or 13th year based on calendar years) of dividend increases in February 2016.

Jack Henry & Associates has an outstanding record of dividend growth. With only 2 exceptions since 1991, the company has increased dividends by more than 10% each year. In many years, the dividend increase has been significantly higher. Over the last 5 years, Jack Henry & Associates has grown its dividend from 38 cents in 2010 to a projected $1.00 in 2015, compounding the dividend by 21.35% a year. Over the last 10 and 20 years, the annual dividend growth has been 18.71% and 17.70%. This means that the company has more than doubled its dividend payout every 5 years over the last two decades.

Jack Henry & Associates has split its stock 6 times in the last 25 years. Curiously enough, each split has been in March: 3-for-2 splits in March 1992, March 1993 and March 1997; a 4-for-3 split in March 1994; and 2-for-1 splits in March 2000 and March 2001. A single share purchased prior to the March 1992 would have split into 18 shares by now.

Over the 5 years ending on December 31, 2014, Jack Henry & Associates stock appreciated at an annualized rate of 23.51%, from a split-adjusted $21.37 to $61.43. This dramatically outperformed both the 13.0% compounded return of the S&P 500 index and the 15.9% annualized return of the S&P Mid Cap 400 index over the same period.

Jack Henry & Associates’ Direct Purchase and Dividend Reinvestment Plans

Jack Henry & Associates has a dividend reinvestment plan, however you need to be a registered shareholder to join the plan. The company does not have a direct purchase plan. If you join the dividend reinvestment plan, you will need to reinvest all your dividends; partial dividend reinvestment is not available under the plan.

The plan’s fee structure is somewhat favorable for investors. When purchasing shares through dividend reinvestment, the company picks up the transaction fee, but you will still pay a brokerage commission of 10 cents per share purchased. When you sell your shares, if you choose to sell under a batch order (in which your shares are grouped with other sell orders and sold at a later date not of your choosing), you’ll pay a transaction fee of $2 plus a commission of 10 cents a share. If you sell your shares under a market order, you’ll pay a transaction fee of $25 plus a commission of 12 cents per share.

Helpful Links

Jack Henry & Associates’ Investor Relations Website

Current quote and financial summary for Jack Henry & Associates (finviz.com)

Information on the direct purchase and dividend reinvestment plans for Jack Henry & Associates

 

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