Thomson Reuters is a leading global data and information resource for professional markets. It emerged from a merger between Thomson Corporation and Reuters in 2008.

Thomson Reuters caters to the needs of its legal, tax, compliance, government and media clients. Due to his 100 years of experience, his customers trust the integrity and correctness of the information.

The US is Thomson Reuters’ main business area and accounts for 79% of sales, followed by the EMEA (11%), Other Americas (6%) and APAC (4%) regions. The company operates in more than 100 countries and has # 1 or # 2 market shares in most of the segments in which it operates.

Thomson Reuters has three main customer segments: Legal Professionals (42% of sales), Corporates (23%) and Tax & Accounting Professionals (14%), collectively known as Big3. Reuters News (11%) and Global Print (10%) are the other two. The company is also involved in the London Stock Exchange Group.

TRI is also available as a double-listed stock trading under TRI on the NYSE.

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Investment data

Sales growth and market exposure

Thomson Reuters generates much of its revenue from sales of electronic content and services to professionals, mostly on a subscription basis. Thomson Reuters has a huge base of ~ 500,000 customers and has a good opportunity to grow by cross-selling and upselling to existing customers.

The company is known for providing world class products and services and has a retention rate of ~ 90%. Customer relationships and the authenticity of information are Thomson Reuters’ greatest competitive advantages. The company is known worldwide for delivering critical news, information and analysis in a timely manner. It has the ability to better serve customers and access new customer groups.

As the world’s leading source of news and information for professional markets, Thomson Reuters has developed a deep and broad knowledge of the industry, products and services tailored to professional needs. Because of its good reputation and high customer dependency, the company is well positioned to win annual price increases. Thomson Reuters posted organic sales growth of 2% and Big3 segment sales growth of 4% in the final quarter of fiscal 2020. Recurring revenue increased 5% and accounted for 80% of total revenue.

The company also announced a two-year change program that will transform it from a holding company to an operating company and from a content provider to a content-driven technology company. The change program will increase both growth and efficiency and is expected to generate additional annual revenue of $ 100 million and annual operating cost savings of $ 600 million in 2023. It targets organic sales growth of 5% to 6% in 2023 and Big3 sales growth of 4.5% -5.5% in 2021.

Dividends

Thomson Reuters is a Canadian dividend aristocrat and dividend earner with more than 25 years of direct dividend raising, backed by strong and consistent cash generation opportunities. It currently has a yield of 1.7% and a payout ratio of 70%. The company recently increased its payout by more than 12%, making it its 28th consecutive year of dividend increases.

A 10 year CAGR of 2.5% was also registered. Thomson Reuters recently completed the repurchase of $ 200 million of its common stock under its NCIB, which began in January 2021.

Thomson Reuters operates in large global market segments with significant growth potential. The company is well positioned to benefit from the growth of the legal, tax, accounting and government businesses in healthy and developing markets. Thomson Reuters’ potential market segment is ~ $ 47 billion, growing 7% to 9% (5-year CAGR).

The company should continue to benefit from growing future demand, cost control measures and a customer-centric approach. Thomson Reuters aims to reduce capital costs to 6% to 6.5% of sales in 2023 and improve operational efficiency. Refinitiv (its former finance and risk business) achieved its target savings on ongoing costs of $ 650 million in late December 2020.

Thomson Reuters is targeting a payout ratio of 50% to 60% and free cash flow of $ 1.8 billion – $ 2 billion in 2023 and $ 1 billion – $ 1.1 billion in 2021. Owning and maintaining extensive proprietary databases and enterprise solutions form a deep trench around Thomson Reuters’ business.

Thompson Reuters (TRI) historic return
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competition

Thomson Reuters operates in highly competitive markets. It is a leader in every market in which it operates. Rapid technological changes and changing customer requirements continue to pose challenges for the company. It competes with a variety of large and specialized providers such as Bloomberg, FactSet, S&P Global, Dow Jones, and large IT providers such as IBM.

In the professional software and services segment, Thomson Reuters competes with companies such as Intuit and Sage and Tyler Technologies in the government software segment. In addition, the company competes with other software and service providers as well as ERP providers.

Bottom line

Thomson Reuters should continue to grow as it seeks to improve the customer and digital experiences and simplify the organization. The company has a healthy business model based on subscriptions and recurring income.

COVID-19 has changed the way professionals work today, and the demand for trustworthy, authoritative content with unique data, AI / machine learning and software will only increase more than ever. Thomson Reuters companies are well positioned for a post-COVID world. An optimized operating company should continue to add performance and value to shareholders.

TRI against TSX against SP500
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Thompson Reuters (TRI) historic PE
Thompson Reuters (TRI) historic return

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