GCM Grosvenor (NASDAQ:GCMG) Will Pay A 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 June. The dividend yield will be 4.6% based on this payment which is still above the industry average.

See our latest analysis for GCM Grosvenor

GCM Grosvenor's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. 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.

Earnings per share is forecast to rise by 69.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 91%, which is on the higher side, but certainly still feasible.

GCM Grosvenor Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2021, the dividend has gone from $0.24 total annually to $0.44. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. 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.

Dividend Growth Could Be Constrained

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that GCM Grosvenor has grown earnings per share at 33% per year over the past three years. Although earnings per share is up nicely GCM Grosvenor is paying out 119% 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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

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 3 warning signs for GCM Grosvenor (1 makes us a bit uncomfortable!) 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.