At the current GQG Partners Inc (ASX: GQG) share price, the funds management business could pay a very large dividend yield. We shouldn't call a business a buy just because it offers big passive income – there needs to be more to it than that.
Is that valuation attractive? Can the business deliver good earnings growth? Is this a good time to invest?
This company is listed on the ASX, but it's a US-headquartered business with a presence in a number of other countries including Canada, the UK and Australia.
I'm going to look at three factors that make me believe it's a very attractive investment.
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Dividend yield
As a fund manager, the business doesn't need to invest a lot of capital to deliver much growth – it doesn't need a new factory, a warehouse, a shop, more customer deposits and so on. The same investment team can manage another US$1 billion.
That means the business can pay a large dividend yield without hurting its growth outlook much.
In recent years, GQG has stuck to a dividend payout ratio of 90% of its annual distributable earnings.
The financial institution Macquarie Group Ltd (ASX: MQG) has forecast that GQG could pay an annual dividend per share of US 16.4 cents in FY26, which would translate into a dividend yield of 13% at the current GQG share price. That's a really appealing yield, in my opinion.
Strong earnings growth
Almost all of the company's revenue comes from management fees as a percentage of its funds under management (FUM), rather than performance fees.
The business doesn't charge as much in fees as many active fund manager competitors, despite the fact its funds have a track record of outperforming their benchmarks over the long-term.
Therefore, the direction of the FUM is integral for the company to deliver earnings growth.
In the FY24 result, GQG reported revenue rose 46.9%, distributable earnings rose 50.4% and the dividend per share increased by 50.2%.
Since December 2024, FUM has increased a further 10% to May 2025, which suggests to me that the revenue, net profit and the annual dividend (yield) can continue rising in FY25 at a good pace, particularly if the business continues seeing monthly net inflows of more than US$1 billion.
Attractive valuation
For a business growing at double-digit pace, I think it's trading at a very appealing price/earnings (P/E) ratio.
According to the forecasts from Macquarie, the GQG share price is trading at just 7x FY26's estimated earnings.
I think this is a very attractive valuation, combined with a large dividend yield. I'm optimistic it can outperform the S&P/ASX 200 Index (ASX: XJO) over the next two to three years.
