GCM Grosvenor (NASDAQ:GCMG) Is Paying Out A Larger Dividend Than Last Year

GCM Grosvenor Inc. (NASDAQ:GCMG) will increase its dividend on the 15th of December to $0.12, which is 9.1% higher than last year's payment from the same period of $0.11. This takes the dividend yield to 3.8%, which shareholders will be pleased with.

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Estimates Indicate GCM Grosvenor's Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, GCM Grosvenor's dividend made up quite a large proportion of earnings but only 50% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Earnings per share is forecast to rise by 4.7% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 96% over the next year.

View our latest analysis for GCM Grosvenor

GCM Grosvenor Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2020, the dividend has gone from $0.24 total annually to $0.44. This means that it has been growing its distributions at 13% 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.

The Dividend Looks Likely To Grow

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 five years, at 25% per annum. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

We Really Like GCM Grosvenor's Dividend

Overall, a dividend increase is always good, and we think that GCM Grosvenor is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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. Case in point: We've spotted 2 warning signs for GCM Grosvenor (of which 1 makes us a bit uncomfortable!) 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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