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

GCM Grosvenor Inc.'s (NASDAQ:GCMG) investors are due to receive a payment of $0.11 per share on 15th of September. This means the annual payment is 5.8% of the current stock price, which is above the average for the industry.

See our latest analysis for GCM Grosvenor

GCM Grosvenor'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, GCM Grosvenor's dividend was higher than its profits, but the free cash flows quite comfortably covered it. 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. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

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 annual payment during the last 3 years was $0.24 in 2020, and the most recent fiscal year payment was $0.44. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. GCM Grosvenor 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.

GCM Grosvenor's Dividend Might Lack Growth

Investors could be attracted to the stock based on the quality of its payment history. GCM Grosvenor has impressed us by growing EPS at 64% per year over the past three years. Although earnings per share is up nicely GCM Grosvenor is paying out 170% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Our Thoughts On GCM Grosvenor'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 company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for GCM Grosvenor (1 doesn't sit too well with us!) that you should be aware of before investing. 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.