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 17th of September. The dividend yield will be 4.0% based on this payment which is still above the industry average.

See our latest analysis for GCM Grosvenor

GCM Grosvenor's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, the dividend made up 83% of cash flows, but a higher proportion of net income. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Over the next year, EPS is forecast to expand by 114.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

GCM Grosvenor Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 4 years was $0.24 in 2020, and the most recent fiscal year payment was $0.44. This means that it has been growing its distributions at 16% per annum 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 Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. GCM Grosvenor has seen EPS rising for the last three years, at 28% per annum. While EPS is growing rapidly, GCM Grosvenor paid out a very high 120% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

GCM Grosvenor's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, GCM Grosvenor has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is GCM Grosvenor not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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