ASX dividend share GQG Partners Inc (ASX: GQG) is building a reputation for paying large annual passive income. 2024 is shaping up to be a rewarding year for investors.
GQG is a fund manager that manages a very large amount of money. At the end of November 2023, the funds under management (FUM) was US$112.6 billion.
Let's have a look at how much profit it might get in 2024.
Passive income powerhouse
According to Commsec, the business is projected to pay a dividend of 14.9 cents per share in 2024. At the current GQG share price, that would represent a dividend yield of 9.1%.
Keep in mind that's an unfranked dividend yield, so the company is projected to pay a large annual payment thanks to its low valuation in price/earnings (P/E) ratio.
If GQG pays 14.9 cents per share in 2024, then owning 13,423 GQG shares could pay $2,000 of annual dividends for 2024.
Buying this many GQG shares would currently come at a cost of around $22,000. That's certainly more than a loaf of bread, but it's something an investor can build up to.
The dividend from GQG is projected to grow 8.7% to 16.2 cents per share in 2025, which would translate into a forward dividend yield of around 10% at the current valuation. Owning 13,423 shares would pay $2,174.53 of annual passive income.
Like most companies, any dividend growth will need to be funded by growing earnings.
Why are earnings likely to keep growing?
I think there are plenty of reasons to believe GQG can keep growing its dividend, that's why it's one of my preferred ASX dividend shares at the moment.
The company bases its dividend payout ratio on 90% of distributable earnings, leaving a bit of retained profit to improve the balance sheet or invest for growth.
Most of the earnings come from management fees rather than performance fees, so the growth of FUM is a key driver of revenue and profit. FUM growth looks possible to me because of two factors.
Over the long-term, asset prices have shown a habit of rising, which is a natural boost to FUM. However, asset prices are certainly not guaranteed to rise, particularly in any given year – just look at what has happened over the last two years.
On top of that, GQG's main investment strategies have delivered outperformance compared to their benchmarks. This type of investment performance, while not certain, is useful for growing existing FUM and attracting more investor money.
FUM inflows are also very positive. In the first 11 months of 2023, it has seen net inflows of US$9 billion. As long as FUM keeps flowing in, that's a strong tailwind for earnings and the dividend.
Foolish takeaway
GQG is a rare business in my opinion – it has a high dividend yield and it seems that earnings can continue to grow at a good rate over the next 12 months (and hopefully beyond). Despite the recent rise of the GQG share price, I still don't think the market is fully appreciating the potential of this business.
