Alternatives have historically paid 40%–60% of their earnings in dividends. Their earnings have improved in recent quarters, and as a result, payouts in the form of dividends and repurchases have increased sequentially.
However, on a year-over-year basis, dividends have fallen. Alternative managers have maintained their yields in the range of 4%–10%. Improved markets and liquidity have led to higher realizations and distributions. In 2017, dividends are expected to rise as performance improves alongside the economy as a whole.
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Among alternatives, Blackstone Group’s (BX) shareholder dividend was $0.41 in 3Q16. This dividend translated to an annualized yield of 6.1%, a fall of 16% over the prior year’s dividend. In 3Q16, the company managed distributable earnings of $593 million on the back of $350 million in net realized performance fees.
KKR & Co. (KKR) is continuing with its fixed dividend distribution policy, with a quarterly dividend of $0.16 per common share. The figure translates to an annualized dividend yield of 4%, the lowest among alternative managers. The company believes in retaining profits in order to generate capital returns for shareholders.
The Carlyle Group (CG) also saw a fall in dividends per share to $0.50 compared to $0.56 in the prior year’s quarter. This figure translates to an annualized dividend yield of 14.4%. On a quarter-over-quarter basis, the company saw lower distributions and carry fund valuations.
Apollo Global Management (APO) has declared a cash distribution of $0.35 per share, an annualized yield of 6.4%. The company plans to distribute all of its distributable earnings after taxes.
Alternative asset managers (IYF) have enhanced their buyback programs on lower valuations in 2016. Carlyle is continuing with its $200 million share repurchase program. In October 2016, KKR bought back 31.5 million common units for $457 million of its announced $500 million share repurchase program.
Apollo also announced a share buyback plan of $250 million to be utilized by 2017. In September 2016, the company repurchased $48 million worth of its own stock.
Next, let’s look at the valuations of these alternative asset managers.