The Macquarie Group Ltd (ASX: MQG) share price could be one to think about for dividends.
Macquarie is one of the largest businesses on the ASX with a market capitalisation of around $58 billion according to the ASX.
It has a few different divisions: Macquarie Asset Management, banking and financial services, commodities and global markets, and Macquarie Capital.
Image Source: Getty Images
Acquisitions
The business has been busy making acquisitions in recent months to boost its scale and earnings.
In December 2020, Macquarie announced it's going to acquire Waddell & Reed Financial, which is a US-based asset and wealth manager, for US$1.7 billion. It has/had assets under management (AUM) of US$68 billion.
The increased scale and diversification of combining the two platforms were expected to create "significant long-term benefits of clients, advisors and shareholders."
At the time of the acquisition, Macquarie said that Macquarie Asset Management's AUM would increase to US$465 billion. That was expected to turn the business into a top 25 actively managed, long-term, open-ended US mutual fund manager by AUM, with the scale and diversification to competitively position the business to maintain and extend its high standards of service to clients and partners.
Then, today, it was announced that Macquarie Asset Management was buying AMP Limited's (ASX: AMP) AMP Capital global equity and fixed income business, which also includes Australian listed equities, listed real estate and listed infrastructure.
The AMP acquisition is costing Macquarie up to $185 million and adds A$60 billion in assets under management (AUM). The Macquarie Asset Management pro forma AUM is brought to approximately A$720 billion.
Earnings and dividend
Macquarie managed to grow its profit in FY21 despite all of the impacts of COVID-19 on various parts of the business.
Full year FY21 net profit increased 10% to $3 billion. But it was the FY21 second half net profit that particularly shone, with growth of 106% to $2 billion. At 31 March 2021, the AUM was $563.5 billion.
International income was 68% of total income in FY21, meaning it's quite well diversified when it comes to revenue. That also gives the business the ability to invest and expand anywhere in the world – like it chose to do with the Waddell & Reed acquisition.
With a dividend payout ratio of 56%, it paid an annual full year dividend of $4.70. That means the trailing dividend yield is a partially franked yield of 3%.
Morgans thinks that the annual Macquarie dividend will grow to $5.26 in FY22 and increase again to $5.90 in FY23. That means that Morgans believes Macquarie has a partially franked dividend yield of 3.75% for FY23.
Is Macquarie a buy?
There are some divergent views on the Macquarie share price.
Morgans thinks Macquarie is a buy with a price target of $171 for the next 12 months.
However, there's also the broker Citi that believes Macquarie is a sell with a price target of $140. That suggests that the share price could fall around 10% over the next year if Citi is right.
