The Dow Jones Industrial Average is comprised of 30 of the largest and most popular blue-chip stocks today. The index's diversity and stability make it an appealing place to start if you are new to investing. However, its returns over the long term are hardly market-beating.
The Dow Jones has underperformed the broader S&P 500 index over the last 10 and 20 years. That means investors looking for market-beating returns may be better off investing in individual growth stocks, like the unstoppable dividend stock Blackstone Inc. (BX -1.40%).
Here's a closer look at the company and why it could help you beat the Dow Jones in the years to come.
A track record to be proud of
Blackstone Inc. is one of the largest investment management companies in the world, having just under $941 billion in assets under management (AUM) at the time of this writing. The company specializes in alternative assets -- investing and managing things like real estate, private equity, public and private debt, and life sciences, among others.
The majority of its money is made through fees earned by managing assets for large investment firms, insurance companies, funds, and institutional investors. Blackstone has nearly tripled its AUM over the last seven years, growing its assets by 26% on an annualized basis during that period. The more assets Blackstone manages, the more money it makes. As of second-quarter 2022, its fee-related earnings (FRE) were up 45% from the year prior for a record $1 billion.
Since going public in 2007, the company has provided a nearly 12% annualized return, far outpacing the S&P 500 and the Dow Jones during that same period. While the stock is down 24% over the last year, there's reason to believe the company will continue to beat the market in the coming years.
1 billion reasons it should continue to grow
The company's incredible growth is undoubtedly due to an increased interest in alternative assets over the last 10 to 15 years. That interest is likely to continue as the markets deliver more volatility.
Investors are pouring money into alternative assets in an effort to combat inflation and achieve more stability in an uncertain economy. For example, Blackstone's private real estate investment trust (REIT), BREIT, is one of the fastest-growing REITs today. In 2021, it received around $2 billion in private investments per month on average, and the company has notably outperformed publicly traded REITs.
It's also in an extremely favorable financial position. It's got an A+ and A- rating from S&P Global and Fitch Ratings, respectively, and $10 billion in cash on hand, with another $9.8 billion in net investments. That's enough to pay off its $9 billion in debt immediately and still leave the company with cash to keep investing.
Its nearly 6% dividend yield has built-in stability
Aside from its dividend yield being over two times that of the Dow Jones Industrial Average ETF (DIA 0.45%), Blackstone's super-attractive dividend yield of 6% comes with some built-in stability. Its payout ratio is around 85% of its distributable earnings, which is a very manageable rate given the company's current earnings and strong financial position.
Blackstone doesn't pay its dividends at a fixed price monthly or quarterly. Instead, it pays a variable rate of return based on its recent performance in addition to stock issuance, averaging around a 5% yield historically.
Recent market volatility has put the stock at a reasonable valuation. It's currently trading around 15 times its price to earnings. For comparison, BlackRock Inc., the largest investment firm in the world, is trading at 14.5 times its price to earnings. This means Blackstone's fairly priced in relation to its peers.
Given the company's attractive dividend yield, the opportunity for continued growth, and discounted pricing, it's a clear contender to beat out the Dow Jones for the foreseeable future.
