Blackstone Inc. (NYSE:BX) has announced that it will be increasing its dividend from last year’s comparable payment on the 17th of February to $1.49. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.
Blackstone’s Future Dividend Projections Appear Well Covered By Earnings
A big dividend yield for a few years doesn’t mean much if it can’t be sustained. Based on the last payment, the company wasn’t making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn’t be confident about this continuing.
Over the next year, EPS is forecast to expand by 118.6%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 61% which brings it into quite a comfortable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $2.12 in 2016, and the most recent fiscal year payment was $4.74. This means that it has been growing its distributions at 8.4% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
Blackstone’s Dividend Might Lack Growth
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Blackstone has grown earnings per share at 21% per year over the past five years. Although earnings per share is up nicely Blackstone is paying out 122% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.
The Dividend Could Prove To Be Unreliable
In summary, while it’s always good to see the dividend being raised, we don’t think Blackstone’s payments are rock solid. In general, the distributions are a little bit higher than we would like, but we can’t ignore the fact the quickly growing earnings gives this stock great potential in the future. Overall, we don’t think this company has the makings of a good income stock.
It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we’ve come across 2 warning signs for Blackstone you should be aware of, and 1 of them can’t be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.