GCM Grosvenor (NASDAQ:GCMG) Is Due To Pay A Dividend Of $0.11

The board of GCM Grosvenor Inc. (NASDAQ:GCMG) has announced that it will pay a dividend of $0.11 per share on the 15th of June. This makes the dividend yield 6.2%, which will augment investor returns quite nicely.

Check out our latest analysis for GCM Grosvenor

GCM Grosvenor's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, GCM Grosvenor's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Over the next year, EPS is forecast to expand by 183.3%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 46% which brings it into quite a comfortable range.

GCM Grosvenor Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 2 years was $0.24 in 2021, and the most recent fiscal year payment was $0.44. This works out to be a compound annual growth rate (CAGR) of approximately 35% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

GCM Grosvenor Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that GCM Grosvenor has been growing its earnings per share at 82% a year over the past three years. Although earnings per share is up nicely GCM Grosvenor is paying out 134% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Our Thoughts On GCM Grosvenor's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about GCM Grosvenor's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, GCM Grosvenor has 3 warning signs (and 2 which are concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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