Returns to shareholders
KKR & Co. (KKR) expected to post earnings per share of $0.47 in the September quarter due to an improvement in private and public market holdings. The company reported an economic net income of $191 million for 2Q16, mainly due to strong public market appreciation and rebound in energy holdings. The stock has gained 14% over the past week mainly due to better-than-expected operating results.
First Data (FDC) is one of KKR’s major holdings. KKR’s exposure to First Data resulted in a before-taxes loss of $300 million in 1Q16. The company also used $1 billion of its own money for the stock over that time period. This resulted in losses on the balance sheet.
KKR successfully raised new capital for its private and public market funds. The company bought back its own stock to take advantage of its lower valuations.
KKR declared a dividend of $0.16 per share in 2Q16. This translates into an annualized dividend yield of 5.5%. The company’s dividend yield fell due to lower distributions compared to previous quarters. Its peers have the following dividend yields:
Together, these companies form 4.1% of the PowerShares Global Listed Private Equity ETF (PSP).
KKR is valued at 11.2x on a one-year forward earnings basis compared to its peers. Currently, it’s trading at 10.5x. The company traded at a premium, mainly due to strong fundraising and the expectation of improved investment performance. KKR’s reported AUM (assets under management) reached ~$131 billion in 2Q16. Its fee-paying AUM is ~$95 billion.
KKR fell by 39% over the past 12 months due to higher risks in alternatives, falling holdings valuations, withdrawal of capital, and lower new deployment of capital. Limited partners are seeking lesser risky deployments in order to reduce steep declines in holdings and valuations of the company.
For a more detailed analysis of the company, please read KKR: The $100 billion alternative asset manager.