Alternative asset managers have distributed 40%–60% of their earnings in dividends. Their earnings have improved in 2H16, and as a result, dividends and repurchases have risen sequentially.
However, on an absolute basis, dividends have fallen YoY. Alternative managers have maintained their yields in the range of 4%–7%. In 2017, dividends could rise on an absolute basis as economic net income and distributions rise.
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Among alternatives, Blackstone Group’s (BX) shareholder dividend was $0.47 in 4Q16. This dividend translated to an annualized yield of 6.2% as compared to $0.41 in the previous quarter. In 4Q16, the company managed distributable earnings of $692 million on the back of $500 million in net realized performance fees.
KKR (KKR) increased its fixed dividend by $0.01 in 4Q16 with a quarterly dividend of $0.17 per common share. The figure translates to an annualized dividend yield of 3.8%, the lowest among alternative managers. The company believes in retaining profits in a bid to generate capital returns for shareholders.
Carlyle Group (CG) declared a dividend of $0.16 per share in 4Q16, which was lower than the $0.29 in 4Q15 and $0.50 in 3Q16. The payout translates to an annualized dividend yield of 4%.
Apollo Global Management (APO) has declared a cash distribution of $0.45 per share, an annualized yield of 6.1%. The company plans to distribute all of its distributable earnings after taxes.
Alternative asset managers (XLF) have enhanced their repurchase programs on lower valuations in 2016. Carlyle is continuing with its $200 million share repurchase program. As of February 2017, KKR (KKR) bought back 31.7 million common units for $459 million of its announced $500 million share repurchase program in October 2015. KKR’s board has approved an additional $250 million for repurchases in 2017.
Apollo also has announced a share buyback plan of $250 million in 2017. In December 2016, the company repurchased $54 million worth of its own stock.
Next, let’s study the valuations of alternative asset managers in 2017.