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Blackstone: An Alternative Asset Manager to Consider
Stock Analysis & Ideas

Blackstone: An Alternative Asset Manager to Consider

Blackstone (BX) is one of the largest alternative investment firms in the world, with total assets under management of $881 billion as of its latest filings. The company strives to have a positive economic impact and long-term value for its investors by utilizing flexible capital in alternative industries.

Its alternative asset management businesses comprise investment vehicles concentrated on real estate, private equity, public debt, and equity, growth equity, non-investment grade credit, and various other funds on an international scale.

Blackstone has been enjoying fantastic momentum over the past few years through a tremendous inflow of funds towards its assets, resulting in growing fees and fantastic economies of scale for the company. The company’s latest results were quite strong, while management has done a great job with paying a growing dividend.

Due to its relatively fair valuation and strong capital return prospects, I am bullish on Blackstone.

Latest Results

Blackstone’s Q4-2021 results came in rather strong, marking an excellent way to end 2021. Total revenues equaled $5.76 billion, ~58.7% higher year-over-year, powered by solid growth in both advisory fees and substantial growth in investment income.

Specifically, management and advisory fees increased 29.2% to almost $1.46 billion, while investment income increased 62% to over $4.0 billion versus Q4 2020. Distributable earnings amounted to $2.3 billion or $1.71 per share, up 55% year-over-year.

Following a great Q4, Blackstone proudly said that its FY-2021 results were the best in its 36-year history. Distributable earnings for Fiscal Year 2021 came in at $6.1 billion or $4.77 per share, 85% and 80% higher from the prior year, respectively. This was achieved due to the company’s total assets under management growing to ~$881 billion, an increase of 42% year-over-year, propelled by $270.5 billion in inflows during this period.

With an excess amount of cash flowing into the markets following the FED’s money-printing machine working overtime last year, it makes sense that a great portion would flow into Blackstone’s alternative assets – especially at a time during which historically conventional assets have become less conventional so to speak.

The Dividend 

Blackstone declared a quarterly dividend of $1.45 along with its latest earnings report, bringing the company’s Fiscal Year 2021 dividend per share to $4.06. Blackstone does not follow the usual path that most company’s do, of paying a constant quarterly dividend that grows over time.

Instead, the dividend is variable, based on Blackstone’s underlying profits. On the one hand, this does not provide satisfactory predictability for shareholders in terms of their future potential income. That said, it provides the company with great flexibility.

Based on my initial Fiscal Year 2022 distributable EPS estimates of $6.80 founded on the company’s current asset inflow trajectory and overall momentum, I project FY-2022 dividends at least as high as the latest quarterly dividend per share run rate (i.e., at around $6.00). This implies a forward yield of around 4.5%, potentially, which I especially appreciate since it should be well-covered.

Wall Street’s Take

Turning to Wall Street, Blackstone has a Moderate Buy consensus rating, based on eight Buys and four Holds assigned in the past three months. At $152.30, the average Blackstone price target implies 18.3% upside potential.

Conclusion 

In my view, Blackstone is a winner in the alternative asset management space. Its latest results prove the company’s ability to attract a very high inflow of funds.

With the stock trading at around 19.4 times next year’s potential distributable earnings per share, I find Blackstone quite attractively priced. For this reason, I am bullish on the stock.

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