High dividend yields
Alternative asset managers started going public in 2007. Blackstone’s (BX) equity has returned a compounded annual growth rate of 18% over the past five years. It has also paid out substantial dividends with a yield of 7%–9%.
Blackstone’s current dividend yield stands at 8%, which is on par with the industry average. However, the company’s per share dividend fell 51% in the June quarter on a year-over-year basis. Blackstone managed higher distributable earnings of $503 million in 2Q16 on the back of $353 million in realized performance fees. While Blackstone has a dividend yield of 8%, its peers’ yields are as follows:
Together, these companies form ~1.4% of the Financial Select Sector SPDR ETF (XLF). In the September quarter, Blackstone’s dividend is expected to rise on the back of operating performance, higher realized income, and performance income.
Realizations are key for new rounds
One of the major factors affecting distributable income and dividend payouts is the fee from net realization activity (or the portion of total fees earned when companies or investments are liquidated or monetized). In July 2016, the company realized a total of $7 billion in private equity and real estate liquidations reflecting very high growth. In 2Q, the company’s private equity division realized $3.8 billion and the real estate division raked in $3.4 billion. Investors prefer faster liquidations of their stake and commit more capital to firms providing quick liquidity and returns.
Over the past few years, Blackstone has returned $40 billion to its investors. Realizations are expected to be high in 3Q16 as Blackstone redeploys capital in new avenues of growth.
In the final part of the series, we’ll see how Blackstone valuations are shaping up for the future.