GCM Grosvenor (NASDAQ:GCMG) Has Affirmed Its Dividend Of $0.11

GCM Grosvenor Inc. (NASDAQ:GCMG) has announced that it will pay a dividend of $0.11 per share on the 15th of September. The dividend yield will be 5.3% based on this payment which is still above the industry average.

Check out our latest analysis for GCM Grosvenor

GCM Grosvenor's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, GCM Grosvenor's profits didn't cover the dividend, but the company was generating enough cash instead. 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. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 42%, which is in a comfortable range for us.

GCM Grosvenor Doesn't Have A Long Payment History

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. 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. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Dividend Growth Could Be Constrained

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that GCM Grosvenor has grown earnings per share at 64% per year over the past three years. EPS has been growing well, but GCM Grosvenor has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Our Thoughts On GCM Grosvenor'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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for GCM Grosvenor (of which 1 shouldn't be ignored!) you should know about. 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.