TRI rated a Strong Buy - Motley Fool

TRI sports an attractive dividend yield of four per cent and the company has increased dividends for every single year for the past 20 years, it said. In addition, Thomson Reuters boasts of a disciplined capital allocation policy, having returned more than $9 billion to shareholders in the form of dividends and share buybacks since 2001.

The Fool said Thomson Reuters was more diversified in terms of business lines and geography than both FactSet Research Systems, a provider of integrated financial information and analytical applications to the global investment community, and Morningstar, which offers a range of data, software and research products for investors and asset management services for advisors, institutions, and retirement plan participants.

America accounted for 57 per cent of its 2012 revenues, Europe, the Middle East and Africa 31 per cent, and Asia 12 per cent. Also, Thomson Reuters has four distinct customer groups, with its largest single customer responsible for approximately one per cent of 2012 revenues, it said.

Assessing business risks, the Fool said: “‘Free’ has completely changed the competitive dynamics for many companies in the movie, music and gaming industry. This is equally true in the information business, as many organizations and government agencies make more information available to the public for free. Despite claims from service providers on how they add value to client through enhanced analysis and various applications & tools, there is no hiding from the fact that information is a commodity. If more clients switch to free alternatives for information, it will result in lower demand for Thomson Reuters’ services and reduced revenues.

“Notwithstanding high customer switching costs, this is still a service industry where client satisfaction is top priority. One example was challenges related to the launch and development of Thomson Reuters Eikon in 2011. Early bugs and customer service issues saw slower than expected adoption rates for this next generation Financial & Risk desktop platform, which eventually led to the resignation of Devin Wenig, the head of the Markets division then.”

It concluded: “Undervaluation relative to peers and a solid dividend yield makes this stock a strong buy.”

TRI reached $32.26 in New York on Friday. Its 52-week range is $26.20-$32.87. In Toronto, the price reached a high of C$33.04. The 52-week range is C$26.65-C$33.40. ■