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

Grosvenor Capital Management, L.P.'s (NASDAQ:GCMG) dividend will be increasing from last year's payment of the same period to $0.11 on 15th of December. This takes the dividend yield to 5.1%, which shareholders will be pleased with.

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Grosvenor Capital Management's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Grosvenor Capital Management's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 16.8% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 70%, which is comfortable for the company to continue in the future.

Grosvenor Capital Management Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 2 years was $0.24 in 2020, and the most recent fiscal year payment was $0.44. This implies that the company grew its distributions at a yearly rate of about 35% over that duration. 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.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Grosvenor Capital Management's earnings per share is up 161% on last year. We're glad to see EPS up on last year, but we're conscious that growth rates typically slow as companies increase in size. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have. Any one year of performance can be misleading for a variety of reasons, so we wouldn't like to form any strong conclusions based on these numbers alone.

We Really Like Grosvenor Capital Management's Dividend

Overall, a dividend increase is always good, and we think that Grosvenor Capital Management is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. For example, we've identified 3 warning signs for Grosvenor Capital Management (1 is potentially serious!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.