Grosvenor Capital Management (NASDAQ:GCMG) Is Paying Out A Dividend Of $0.11

Grosvenor Capital Management, L.P. (NASDAQ:GCMG) will pay a dividend of $0.11 on the 15th of December. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

View our latest analysis for Grosvenor Capital Management

Grosvenor Capital Management's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Grosvenor Capital Management's dividend was higher than its profits, but the free cash flows quite comfortably covered it. 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.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 41%, which is in a comfortable range for us.

Grosvenor Capital Management 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 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. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Grosvenor Capital Management's Dividend Might Lack Growth

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Grosvenor Capital Management has impressed us by growing EPS at 46% per year over the past three years. EPS has been growing well, but Grosvenor Capital Management has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Grosvenor Capital Management's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Grosvenor Capital Management is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Grosvenor Capital Management has 5 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Grosvenor Capital Management not quite the opportunity you were looking for? Why not check out our selection of top 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.