Stock Analysis

Blackstone's (NYSE:BX) Dividend Is Being Reduced To $0.90

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NYSE:BX
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Blackstone Inc.'s (NYSE:BX) dividend is being reduced from last year's payment covering the same period to $0.90 on the 7th of November. This means the annual payment is 4.8% of the current stock price, which is above the average for the industry.

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Blackstone's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 90% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

EPS is set to grow by 95.6% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 78% which is a bit high but can definitely be sustainable.

historic-dividend
NYSE:BX Historic Dividend October 24th 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the annual payment back then was $0.52, compared to the most recent full-year payment of $4.06. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

There Isn't Much Room To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Blackstone has been growing its earnings per share at 9.5% a year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Blackstone's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. Strong earnings growth means Blackstone has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Blackstone that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

What are the risks and opportunities for Blackstone?

Blackstone Inc. is an alternative asset management firm specializing in real estate, private equity, hedge fund solutions, credit, secondary funds of funds, public debt and equity and multi-asset class strategies.

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Rewards

  • Trading at 2.5% below our estimate of its fair value

  • Earnings are forecast to grow 37.04% per year

Risks

  • Significant insider selling over the past 3 months

  • Has a high level of debt

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