The board of GCM Grosvenor Inc. (NASDAQ:GCMG) has announced that it will pay a dividend on the 17th of June, with investors receiving $0.11 per share. The dividend yield will be 4.6% based on this payment which is still above the industry average.

View our latest analysis for GCM Grosvenor

GCM Grosvenor's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 119% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 73%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Over the next year, EPS is forecast to expand by 69.7%. If the dividend continues along recent trends, we estimate the payout ratio could reach 91%, which is on the higher side, but certainly still feasible.

GCM Grosvenor Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2021, the annual payment back then was $0.24, compared to the most recent full-year payment of $0.44. This means that it has been growing its distributions at 22% per annum 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's Dividend Might Lack Growth

The company's investors will be pleased to have been receiving dividend income for some time. GCM Grosvenor has impressed us by growing EPS at 33% per year over the past three years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

Our Thoughts On GCM Grosvenor's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for GCM Grosvenor (of which 1 can't be ignored!) you should know about. Is GCM Grosvenor not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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