The ASX All Ordinaries (ASX: XAO) stock Pacific Current Group Ltd (ASX: PAC) might be on course to pay investors significant passive income in the coming years.
For investors who haven't heard of this business before, it describes itself as a multi-boutique asset management firm. It applies resources, including "capital, institutional distribution capabilities and operational expertise", to help its partners grow. In other words, it invests in compelling fund management businesses and aims to help them expand.
It's invested in a number of different managers, including GQG Partners Inc (ASX: GQG), Astarte Capital Partners, Banner Oak, Aether, Roc Partners, Victory Park, and Cordillera.
The company has been building a track record of paying dividends to investors. It grew its dividend each year between FY18 to FY22. Time will tell whether FY23 includes an increase, but the projections on Commsec are currently promising for growth.
Potential for $1,000 of passive income a month
Pacific Current could pay an annual dividend per share of 41 cents in FY23, representing a potential increase of almost 8% compared to the FY22 annual payment. At the current Pacific Current share price, that potential payment represents a grossed-up dividend yield of 8%.
The All Ords ASX stock doesn't pay a monthly dividend. But we can take the annual dividends and divide that amount into 12 equal parts.
Just using the cash element of the dividend, and ignoring the franking credits, to get $12,000 of annual dividends with the 2023 annual payout, we'd need to own 29,269 Pacific Current shares. The Pacific Current share price at the time of publishing is $7.11, so that would represent a hefty investment of $208,000.
However, the dividend payout is expected to rise in FY24 to 46 cents per share. This would make the forward grossed-up dividend yield around 9%. Thinking about that passive income payment, it would mean an investor would only need to own 26,087 Pacific Current shares. That equates to a slightly more modest investment of $185,500.
Can the ASX All Ords stock deliver dividend growth?
I think that Pacific Current is demonstrating some of the right attributes to deliver growth.
In its FY23 half-year result, it reported that the funds under management (FUM) of its investment partners grew by 3.5% to A$175 billion, while underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew 35% in Australian dollar terms.
The business is expecting growth in both management fees and performance fees, thanks to fund managers raising capital from investors, or having already recently deployed capital. Also, a number of funds or strategies are nearing the point of generating performance fees that will benefit Pacific Current.
On top of that, new commitments and inflows are expected to continue, while additional investments are also expected. Pacific Current recently announced its investment in the fund manager Cordillera.
Once interest rates stop increasing, this could be a natural boost for the ASX All Ords stock, the passive income it can generate, and the underlying fund managers.
