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For Investors: Blackstone and Its High Equity Returns

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High equity returns

Blackstone (BX) and other major alternative asset managers started going public in 2007. Blackstone’s equity has returned a compounded annual growth rate of 22% over the past five years. It has paid out substantial dividends with a yield of 7%–9%.

In the first nine months of 2015, Blackstone’s distribution to unitholders amounted to $2.12 with an annualized yield of 9%, or 58% higher than the previous year. In the third quarter, the company paid a distribution of $0.49. The company managed higher distributable earnings of $692 million in 3Q15 on the back of $470 million in realized performance fees.

Blackstone has a dividend yield of 9% as compared to its peers with the following dividend yields:

  • Carlyle Group (CG) at 15.7%
  • KKR (KKR) at 9.5%
  • Apollo Global Management (APO) at 12.7%

Together, these companies form ~1.4% of the Financial Select Sector SPDR Fund (XLF).

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Realizations remain strong

One of the major factors affecting payouts is the fee from net realization activity or the portion of total fees earned when investments are sold. Blackstone has improved its realization fee substantially over the last couple of years.

Blackstone’s distributable earnings rose despite lower profitability backed by realization through IPOs (initial public offerings), secondary sales, and distributions. In its private equity division, the company realized $2.7 billion in 3Q15, $14.2 billion on a last-12-month basis, reflecting continued higher realizations.

In the real estate segment, Blackstone achieved a record realization of $3 billion in 3Q15, driven by private sales including Center Parcs and the New York Times office building, bringing last-12-month realizations to $23.5 billion. The company managed realizations of $1.1 billion in credit during the third quarter.

To know more about Blackstone check out Market Realist’s series “The Blackstone Group: Investing with an alternative giant.”

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