I think that fund manager GQG Partners Inc (ASX: GQG) shares could represent one of the best ASX dividend share picks around at the moment.
For me, when I'm thinking about investments for income, I'm looking for names that can pay a dividend yield that approximately matches what some of the leading term deposits are offering at the time.
With some popular term deposits now offering yields of around 4%, I think that's the sort of cash returns we need to be aiming for to qualify as a good ASX dividend share.
Fund manager GQG could tick the boxes I'm looking for.
It provides different investment strategies for investors to put money towards, including global shares, US shares, emerging market shares, dividend shares, and more.
ASX dividend share credentials
The board of GQG Partners has committed to a dividend payout ratio of 90% of distributable earnings.
GQG just reported its FY22 result to investors, which showed that it generated 8 US cents of earnings per share (EPS).
For the 2022 calendar year, it declared dividends totalling 7.76 US cents per share. If we translate that to Australian dollars at the current exchange rate, it translates into 11.28 AU cents.
So, if it paid exactly the same dividend in 2023, that would translate into a forward dividend yield of 8.2%. The dividend is paid quarterly, so that could be a payment of more than 2% every three months.
However, GQG has only paid one year of dividends, so we don't have much of a dividend history to refer to yet.
Why I think growth is coming for GQG shares
In its FY22 result, the company reported that the average funds under management (FUM) over the year was US$88.8 billion.
Net revenue improved 9.8% to US$436.8 million, while net operating income (essentially operating profit) grew by 2.7% to US$237.9 million.
One of the most promising things about 2022, despite all of its volatility and uncertainty, was that the business experienced net inflows of US$8 billion for the full year. That means people and institutions allocated an extra US$8 billion to the fund manager.
I think the fact that each of the main investment strategies have outperformed their respective benchmark materially over the past five years (and since inception) is a very helpful indicator of how well the fund manager can do, and help attract more funds.
To grow FUM, all the ASX dividend share needs to do is produce solid investment returns and this will help ensure the net flows are inflows, not outflows.
Since the beginning of 2023, its FUM has remained broadly stable at US$92 billion as at 31 January 2023. That's higher than the 2022 average FUM. I think average FUM will be higher this year, which should help grow distributable earnings in 2023.
I think another dividend yield of more than 8% can happen in 2023. Indeed, Commsec numbers suggest the 2025 dividend yield could be 11%.
