Brookfield Asset Management (BAM +0.00%) and Blackstone Group (BX +1.76%) 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.
NYSE: BAM
Key Data Points
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.
NYSE: BX
Key Data Points
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:
BX Dividend data by YCharts
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.
Big-time growth ahead
Brookfield Asset Management is a leading global alternative asset manager with over $1 trillion in AUM. The company offers leading platforms built around renewable power, infrastructure, private equity, real estate, and credit. It has launched several products geared toward individual investors in recent years, including a private wealth infrastructure fund and a strategic credit private wealth fund.
The company's business generated nearly $2.5 billion in fee-related earnings last year and almost $2.4 billion in distributable earnings. Brookfield aims to pay out about 95% of its earnings in dividends. Unlike Blackstone, Brookfield pays a fixed dividend each quarter. It recently boosted that payout by 15%.
Brookfield expects to grow its distributable earnings at an 18% compound annual rate through 2029, driven by the visible growth ahead for its alternative asset management business. Given its payout target, the company expects to increase its dividend per share by more than 15% annually over the coming years.
Attractive and growing dividends
Brookfield Asset Management and Blackstone each manage over $1 trillion in alternative assets. Because of that, they collect billions of dollars in recurring management fees each year. Both companies pay out the bulk of that income to investors via dividends. That lucrative stream of dividend income should grow in the future as they continue expanding their already sizable AUM. Because of that, they're great dividend stocks to buy for those seeking to generate a growing stream of passive income.
