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Grosvenor Capital Management (NASDAQ:GCMG) Will Pay A Larger Dividend Than Last Year At $0.11

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 makes the dividend yield 5.1%, which is above the industry average.

View our latest analysis for Grosvenor Capital Management

Grosvenor Capital Management's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Grosvenor Capital Management's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

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Over the next year, EPS is forecast to fall by 16.8%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 70%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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historic-dividend

Grosvenor Capital Management 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 2 years, which isn't that long in the grand scheme of things. 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 35% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. The business has been going well, which we can see by the fact that EPS has risen by 161% in the last year. It's unusual for a company to continue this long term, but we won't complain when it happens. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Grosvenor Capital Management could prove to be a strong dividend payer. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

Grosvenor Capital Management Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Grosvenor Capital Management has 3 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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