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Blackstone Generates High Equity Returns and Rewards Shareholders

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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 2015, Blackstone’s distribution to unitholders amounted to $2.73 with an annualized yield of 12.8%, which was 29% higher than the previous year. In 4Q15, the company paid a distribution of $0.61. The company managed higher distributable earnings of $878 million in 4Q15 on the back of $708 million in realized performance fees.

Blackstone has a dividend yield of 12.8% as compared to its peers with the following dividend yields:

  • Carlyle Group (CG): 15.7%
  • KKR (KKR): 9.5%
  • Apollo Global Management (APO): 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 $3.4 billion in 4Q15, $15 billion on a last-12-month basis, reflecting continued higher realizations.

Blackstone realized a total of $4 billion in the real estate division in 4Q15 despite public market dislocation. Over the past few years, the company has returned $40 billion to its investors.

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

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