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Brookfield Asset Management (NYSE: BAM) and Blackstone Group (NYSE: BX) are two of the biggest alternative asset managers in the world. Each has already surpassed the milestone of having $1 trillion in assets under management (AUM). They generate very lucrative recurring fees for managing those assets on behalf of clients.
That provides them with lots of cash to pay dividends. Brookfield's payout yields 3.6%, while Blackstone's yield is 2.4%.
Despite their already massive sizes, Brookfield and Blackstone still have plenty of growth ahead. Because of that, they should have no trouble continuing to pay more money in dividends in the coming years.
Alternative AUM will keep rising
Investors have steadily increased their allocations to alternative investments over the years because they can lower volatility, enhance returns, and provide broader portfolio diversification. According to Preqin, the leading data provider for the alternatives industry, the sector had $16.8 trillion in AUM at the end of 2023. That number should exceed $30 trillion by 2030, according to Preqin's latest forecast.
One factor expected to drive growth in alternatives is a growing allocation to these investments by wealthy investors. For years, institutional investors like pension funds and insurance companies have driven growth in alternatives. However, asset managers have been providing more opportunities for individuals to invest in alternatives, which is driving the sector's next stage of growth.
The dividend grows with its distributable earnings
Blackstone is the world's largest alternative asset manager, with more than $1 trillion in AUM. The company provides investors access to real estate, private equity, infrastructure, hedge funds, and several other strategies.
The company generated nearly $7.2 billion in revenue from management and advisory fees last year. Meanwhile, its total revenue was over $13.2 billion after adding in incentive fees, performance revenues, and investment income. After expenses and taxes, Blackstone produced $6 billion in distributable income. The company returned $5.6 billion of that money to investors last year via dividends and share repurchases.
Blackstone doesn't pay a fixed dividend each quarter. Instead, it pays out most of its distributable income in dividends, which causes some variability due to when it recognizes performance revenues:
While the payout fluctuates, sometimes considerably, it generally increases as Blackstone's earnings grow. As the leader in alternatives with a growing platform of products geared toward individual investors (including a leading non-traded REIT), Blackstone's dividend should rise in the coming years.