Blue Owl Capital (NYSE:OWL) Is Increasing Its Dividend To $0.12

Blue Owl Capital Inc. (NYSE:OWL) will increase its dividend from last year's comparable payment on the 30th of November to $0.12. This will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.

Check out the opportunities and risks within the US Capital Markets industry.

Blue Owl Capital Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Blue Owl Capital isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.

Earnings per share is forecast to rise by 146.8% 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 getting very high over the next year.

Blue Owl Capital Is Still Building Its Track Record

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Company Could Face Some Challenges Growing The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Blue Owl Capital will be very happy to have seen its EPS grow by 98% in just the last 12 months. It's unusual for a company to continue this long term, but we won't complain when it happens. The company hasn't been turning a profit, but it running in the right direction. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer. However, we would never make any decisions based on only a single year of data, especially when assessing long term dividend potential.

Blue Owl Capital's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Blue Owl Capital will make a great income stock. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.

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. As an example, we've identified 1 warning sign for Blue Owl Capital that you should be aware of before investing. Is Blue Owl Capital 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.