Templeton Dragon Fund, Inc. (TDF) Stock Analysis

Why this analysis is different

• A 9-signal quantitative MoonshotScore built from filings, insider activity, and market data — computed from the numbers, not from opinion.
• An AI Council read across up to eight perspectives — value, macro, quantitative, and momentum lenses — that shows where they disagree instead of averaging the tension away.
• Figures come straight from FMP and Yahoo Finance filings data. The AI writes the narrative around the numbers — it never edits the numbers.

Templeton Dragon Fund, Inc. (TDF) Financial Services Profile

Templeton Dragon Fund, Inc. is a U.S.-domiciled closed-end equity fund, launched in 1994, specializing in actively managed investments within China's public equity markets. The fund targets value stocks across diverse sectors, leveraging fundamental analysis to identify companies with strong growth prospects and competitive positioning.

What Is the Investment Thesis for TDF?

Templeton Dragon Fund, Inc. (TDF) presents an investment thesis centered on its specialized exposure to the Chinese equity market through a value-oriented, actively managed closed-end fund structure. With a market capitalization of $273M and an attractive P/E ratio of 3.52, the fund demonstrates a potentially undervalued position relative to its earnings. Its robust profit margin of 220.7% and gross margin of 94.9% suggest efficient management of its underlying assets and strong performance from its portfolio holdings. The fund's dividend yield of 3.73% offers income potential, while its low beta of 0.50 indicates lower volatility compared to the broader market, potentially appealing to investors seeking stability. Key growth catalysts include the continued expansion of the Chinese economy, which drives corporate earnings for its portfolio companies, and increasing global investor interest in diversified emerging market exposure. The fund's fundamental analysis approach, focusing on value stocks, aims to identify companies with sustainable competitive advantages and strong management, positioning it to capitalize on long-term growth trends in China. Risks include geopolitical tensions, regulatory changes within China, and potential discounts to net asset value inherent in closed-end funds.

Based on FMP financials and quantitative analysis

TDF Key Highlights

Market Capitalization: $0.27 billion, reflecting its size as a specialized closed-end fund.

• Price-to-Earnings (P/E) Ratio: 3.52, indicating a potentially attractive valuation relative to its earnings.
• Profit Margin: 220.7%, demonstrating exceptional profitability from its investment activities.
• Gross Margin: 94.9%, highlighting strong efficiency in managing its investment portfolio.
• Dividend Yield: 3.73%, providing a notable income component for shareholders.
• Beta: 0.50, suggesting lower volatility and market sensitivity compared to the broader equity market.

Who Are TDF's Competitors?

TDF is benchmarked below against 8 industry peers on price, market cap, and our AI MoonshotScore.

AI Score by Stock Expert AI · Price data: FMP / Yahoo Finance

What Are TDF's Key Strengths?

Specialized focus on Chinese value stocks provides targeted market exposure.

• Actively managed approach by Templeton Asset Management Ltd. with rigorous fundamental analysis.
• Established fund with a long operational history since 1994.
• Attractive dividend yield of 3.73% and low beta of 0.50.

What Are TDF's Weaknesses?

Single-country focus exposes the fund to concentrated geopolitical and economic risks in China.

• Closed-end fund structure means its market price can trade at a discount to Net Asset Value (NAV).
• Reliance on the expertise of a specific management team for active outperformance.
• Limited flexibility in capital raising or redemption compared to open-end funds.

What Could Drive TDF Stock Higher?

TDF catalyst: **Upcoming**: Favorable policy announcements from the Chinese government that support economic growth or specific industries.

• **Upcoming**: Strong earnings reports from key portfolio holdings, demonstrating the success of the fund's fundamental stock selection.
• **Ongoing**: Increased foreign direct investment into China, signaling confidence in the market and potentially boosting equity valuations.
• **Ongoing**: Sustained outperformance of the fund's Net Asset Value (NAV) relative to relevant Chinese equity benchmarks.

What Are the Key Risks for TDF?

**Potential**: Escalation of geopolitical tensions or trade conflicts between the U.S. and China, negatively impacting market sentiment and corporate performance.

• **Ongoing**: Regulatory changes within China that could affect the operations or profitability of the fund's portfolio companies.
• **Potential**: Significant economic slowdown or market downturn in China, leading to a decrease in the value of the fund's holdings.
• **Ongoing**: The fund's market price trading at a persistent or widening discount to its Net Asset Value (NAV), limiting shareholder returns.
• **Potential**: Currency fluctuations of the Chinese Yuan against the U.S. Dollar, impacting the fund's returns for U.S.-based investors.

What Are the Growth Opportunities for TDF?

• **Continued Growth of the Chinese Economy**: China's economy continues to be a significant global growth engine, with ongoing urbanization, technological advancement, and domestic consumption expansion. This macro trend provides a fertile ground for the fund's underlying portfolio companies to grow their revenues and profits. As the Chinese government implements policies to stimulate economic activity and foster innovation, TDF's value-oriented approach positions it to identify and invest in companies that are direct beneficiaries of this sustained economic expansion, potentially leading to capital appreciation for the fund's holdings.
• **Increasing Global Investor Allocation to Emerging Markets**: Institutional and retail investors globally are increasingly seeking diversification and higher growth potential beyond developed markets. China, as a major emerging market, often features prominently in these allocations. As global investment flows continue to shift towards emerging economies, funds like TDF, offering direct and specialized exposure to Chinese equities, stand to benefit from increased demand for their underlying assets, potentially driving up the net asset value (NAV) of the fund.
• **Outperformance Potential of Active Management in Volatile Markets**: In complex and less efficient markets, such as China's, active management strategies often have a greater opportunity to outperform passive index-tracking funds. TDF's rigorous fundamental analysis, focusing on specific criteria like competitive advantage, R&D, and management quality, allows it to potentially identify mispriced value stocks. This active approach can navigate market volatility and sector-specific challenges more effectively, aiming to generate alpha and enhance returns for shareholders compared to broader market indices.
• **Demand for Income-Generating Investments**: With a dividend yield of 3.73%, Templeton Dragon Fund, Inc. offers an attractive income component, which is particularly appealing to investors seeking regular cash flow in their portfolios. In a global environment where interest rates can fluctuate, the consistent dividend distribution from a specialized equity fund can attract a segment of investors prioritizing yield. This demand for income, combined with potential capital appreciation from its Chinese equity holdings, can enhance the fund's overall attractiveness.
• **Sector-Specific Opportunities within China**: The fund's strategy of investing across diversified sectors allows it to capitalize on growth opportunities within specific high-potential industries in China. For instance, sectors like technology, renewable energy, healthcare, and consumer discretionary are experiencing significant expansion driven by policy support, innovation, and rising disposable incomes. TDF's fundamental analysis enables it to pinpoint value stocks within these burgeoning sectors, positioning its portfolio to benefit from targeted industry growth rather than relying solely on broad market movements.

What Are TDF's Competitive Advantages?

• **Specialized Expertise**: Deep knowledge and experience in the complex Chinese equity market, leveraging Templeton Asset Management Ltd.'s established research capabilities.
• **Active Management Strategy**: Rigorous fundamental analysis and active stock selection aimed at identifying undervalued companies, potentially leading to outperformance.
• **Established Track Record**: Commenced operations in 1994, providing a long history of navigating the Chinese market.
• **Value-Oriented Focus**: A disciplined investment philosophy targeting value stocks, which can offer a margin of safety and long-term appreciation potential.

What Does TDF Do?

The Templeton Dragon Fund, Inc. is a U.S.-domiciled closed-end equity fund that commenced operations on September 20, 1994. Established by Franklin Resources, Inc. and actively managed by Templeton Asset Management Ltd., its core mission is to provide investors with exposure to publicly traded companies within the People's Republic of China. The fund's investment philosophy is centered on identifying value stocks across a wide array of industries, employing a rigorous fundamental analysis approach. This analytical framework evaluates numerous criteria, including a company's growth potential, its competitive advantage in global export markets, technological capabilities, and commitment to research and development initiatives. Furthermore, the fund assesses operational efficiency, labor and raw material expenditures, profit margins, and return on investment to gauge financial health and sustainability. Capital adequacy, the prevailing regulatory landscape, and the quality of a company's management team are also critical factors in the portfolio construction process. By focusing on these intrinsic value drivers, Templeton Dragon Fund, Inc. aims to build a diversified portfolio designed to capture long-term capital appreciation from the Chinese market. Its closed-end structure means it has a fixed number of shares outstanding, trading on an exchange, which can lead to its market price differing from its net asset value (NAV). The fund's active management seeks to navigate the complexities and opportunities within the dynamic Chinese equity landscape.

What Products and Services Does TDF Offer?

• Manages a U.S.-domiciled closed-end equity fund.
• Invests primarily in publicly traded Chinese companies.
• Focuses on identifying and investing in value stocks.
• Employs rigorous fundamental analysis for stock selection.
• Evaluates companies based on growth potential, competitive advantage, and financial health.
• Assesses management quality, regulatory landscape, and operational efficiency.
• Aims to provide investors with exposure to the Chinese equity market.

How Does TDF Make Money?

• Generates returns through capital appreciation of its underlying Chinese equity holdings.
• Earns income from dividends paid by the companies in its portfolio.
• Charges management fees to cover the costs of active portfolio management and operations.
• Its market price can trade at a premium or discount to its Net Asset Value (NAV).

What Industry Does TDF Operate In?

Templeton Dragon Fund, Inc. operates within the highly competitive and dynamic asset management industry, specifically focusing on the specialized niche of U.S.-domiciled closed-end funds investing in Chinese public equities. The broader asset management sector is characterized by increasing demand for diversified and specialized investment products, particularly those offering exposure to high-growth emerging markets like China. TDF's positioning as an actively managed fund targeting value stocks differentiates it from passive index funds and other growth-focused strategies. The competitive landscape includes other China-focused equity funds, both open-end and closed-end, as well as broader emerging market funds. Market trends indicate continued investor interest in China's economic growth, albeit with awareness of geopolitical and regulatory risks. TDF aims to leverage its fundamental analysis expertise to identify resilient companies within this complex environment, seeking to outperform benchmarks by selecting undervalued assets.

Who Are TDF's Key Customers?

• Institutional investors seeking specialized exposure to Chinese equities.
• Retail investors looking for diversified international investment opportunities.
• Investors with a long-term investment horizon interested in value-oriented strategies.
• Shareholders seeking potential income generation through dividends.

Templeton Dragon Fund, Inc. Financial Trajectory

Templeton Dragon Fund, Inc. (TDF) reported $31.0M in revenue for Q4 2025, reflecting 719.0% growth compared to the prior quarter. The company recorded net income of $40.5M, with diluted EPS of $1.60. Revenue has increased across the last three reported quarters, suggesting sustained momentum for this micro-cap Financial Services company.

How Templeton Dragon Fund, Inc. Is Valued

Templeton Dragon Fund, Inc. carries a market capitalization of $273M, placing it in the micro-cap category. Relative to its peer group, TDF's quantitative score of 48/100 is below the peer average of 70/100.

Return on equity for Templeton Dragon Fund, Inc. stands at 24.7%, a gauge of how efficiently it converts shareholder capital into profit. Return on assets is 23.3%, showing how much profit it generates from its asset base. TDF trades at a trailing price-to-earnings ratio of 3.57, below the Financial Services sector average of ~18x. Its free cash flow yield is 0.0%, a gauge of the cash the business throws off relative to its market value. A current ratio of 11.48 indicates the company holds enough short-term assets to cover its near-term obligations. Its earnings yield is 28.0%, the inverse of the P/E and a quick read on earnings relative to price.

Templeton Dragon Fund, Inc.'s Piotroski F-Score is 5/9, a 9-point checklist of profitability, leverage and efficiency — a middling fundamental profile.

TDF Financials

TDF Latest News

No recent news available for TDF.

TDF Analyst Consensus

TDF MoonshotScore

TDF Financial Services Stock FAQ

Disclaimer: This content is for informational purposes only and does not constitute investment advice. Always do your own research and consult a financial advisor.

Official Resources