E Lazard: Deep Value Stock Yielding Nearly 5%

In spite of the coronavirus crisis, the S&P 500 has rallied 20% in the last 12 months to new all-time highs. But value stocks are much harder to find after the market rally, with the S&P 500 now at a trailing price-to-earnings ratio of 38.4 and with an average dividend yield of just 1.5%.

However, there are still high-yield stocks trading at attractive valuations, such as Lazard (LAZ). Thanks to its recent 15% correction, the stock has become cheaply valued and is currently offering a 4.8% dividend yield. As a result, Lazard has become a deep-value stock.

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Business overview

Lazard is an international investment advisory company, which was founded in 1848. It has two business segments, namely Financial Advisory and Asset Management. The Financial Advisory business includes M&A, debt restructuring, capital raising, and other advisory business. The Asset Management business is about 80% equities and focuses primarily on institutional clients. Lazard generates 60% of its total revenue in Americas, 30% in Europe and Middle East, and 10% in Asia Pacific. Its revenue is almost equally split between its two segments.

Most financial companies incurred a material decrease in their earnings last year due to the coronavirus crisis, which caused a severe global recession and thus exerted great pressure on many companies and individuals. However, this was not the case for Lazard.

In the fourth quarter, Lazard grew its operating revenue by 20% and its adjusted earnings per share by 82% over the prior year’s quarter, from $0.91 to an all-time high of $1.66, thanks to higher assets under management, and high activity in M&A deals and debt restructuring.

Obviously, the company benefited from some aspects of the pandemic, namely the increased need of companies for debt restructuring and the great number of mergers, which resulted from the opportune valuations of some companies and their need to become more efficient via consolidation amid the pandemic. In addition, Lazard benefited from the unprecedented stimulus packages offered by most countries in response to the pandemic and thus it grew its assets under management by 4% in 2020.

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