Grosvenor Capital Management's (NASDAQ:GCMG) Dividend Will Be $0.11
The board of Grosvenor Capital Management, L.P. (NASDAQ:GCMG) has announced that it will pay a dividend on the 15th of December, with investors receiving $0.11 per share. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.
View our latest analysis for Grosvenor Capital Management
Grosvenor Capital Management's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Grosvenor Capital Management's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 41% which is fairly sustainable.
Grosvenor Capital Management Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.24 in 2020 to the most recent total annual payment of $0.44. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. Grosvenor Capital Management has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
Grosvenor Capital Management Might Find It Hard To Grow Its Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Grosvenor Capital Management has impressed us by growing EPS at 46% per year over the past three years. EPS has been growing well, but Grosvenor Capital Management has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.
Our Thoughts On Grosvenor Capital Management's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 5 warning signs for Grosvenor Capital Management you should be aware of, and 1 of them is a bit concerning. Is Grosvenor Capital Management not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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