Grosvenor Capital Management (NASDAQ:GCMG) Will Pay A Dividend Of $0.11
Grosvenor Capital Management, L.P. (NASDAQ:GCMG) will pay a dividend of $0.11 on the 15th of December. This makes the dividend yield 5.3%, which will augment investor returns quite nicely.
View our latest analysis for Grosvenor Capital Management
Grosvenor Capital Management's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 136% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 68%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 41%, which is in a comfortable range for us.
Grosvenor Capital Management Is Still Building Its Track Record
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2020, the annual payment back then was $0.24, compared to the most recent full-year payment of $0.44. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
Grosvenor Capital Management Might Find It Hard To Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Grosvenor Capital Management has seen EPS rising for the last three years, at 46% per annum. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.
Our Thoughts On Grosvenor Capital Management's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 6 warning signs for Grosvenor Capital Management you should be aware of, and 2 of them are a bit unpleasant. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
