My top no-brainer, high-yield ASX dividend stock to buy for 2024

This stock ticks all of my dividend boxes.

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There are a few key things I look for when it comes to ASX dividend stock investing: revenue-boosting growth, potential earnings growth, dividend growth and a good valuation.

I believe that a combination of elements can lead to market-beating returns, including pleasing dividend returns.

The ASX dividend stock I'm going to talk about is one of my favourites at the moment: GQG Partners Inc (ASX: GQG). It's priced as though its earnings aren't growing, and I'm going to show why it looks too good to ignore.

Revenue-boosting growth

GQG is a fund manager that's based in the US – it offers a number of strategies including US shares, international shares, global shares and emerging market shares. Some of the funds that it offers are focused on dividend shares.

Its fee setup is designed so that most of its revenue comes from management fees rather than performance fees. Therefore, funds under management (FUM) growth is the key driver of revenue growth.

At November 2023, the business had US$112.6 billion of FUM, compared to US$90.7 billion of FUM at November 2022, an increase of 24%.

In the first 11 months of 2023, it experienced net inflows of US$9 billion. GQG is growing from both good net inflows of new investor money and solid investment performance of the underlying funds.

Potential earnings growth

Fund managers are very scalable – it doesn't cost the ASX dividend stock much to manage an extra US$1 billion of FUM, so a very healthy portion of the extra revenue can turn into additional profit.

Rising profit is helpful for pushing the GQG share price higher – investors often like to value a business on how much profit they think a company is going to make in the foreseeable future.

I think GQG's underlying net profit can rise faster than the revenue growth thanks to that operating leverage, but if profit growth just matches the revenue growth the GQG returns should be more than adequate.

Profit is what pays for the dividends, so profit growth is what we want to see as passive income investors as well.

Dividend growth

The ASX dividend stock has committed to a dividend payout ratio of 90% of "distributable" earnings. This means as the (distributable) profit grows, the dividend growth should directly match.

The projection of Commsec suggests GQG could pay an annual dividend of 14.5 cents per share in 2024, which would be a forward dividend yield of 8.8%. In 2025 it could pay a dividend per share of 15.7 cents, an increase of 8.3%, and that would represent a dividend yield of 9.6%.

I can't think of many ASX dividend stocks that are expected to grow their dividends in the next two financial years and have a dividend yield as big as that.

Good valuation for the ASX dividend stock

This business, like most fund managers, trades on a low price/earnings (P/E) ratio, which is partly why the dividend yield is so large.

Using GQG's dividend payout ratio and Commsec's projections, GQG is valued at 10 times FY24's estimated distributable earnings and just over 9 times FY25's distributable earnings.

If FUM and profit grow in FY26, then I think the current valuation will seem cheap, particularly if global interest rates start coming down.

Should you invest $1,000 in Gqg Partners Inc. right now?

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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