GQG Partners Inc (ASX: GQG) is the ASX dividend stock I'd buy for large and immediate investment income.
It's not exactly a household name like Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP). But, at the current valuation, I'd definitely pick GQG shares.
You may be wondering what GQG does – it's a funds management business based in the United States, though it's also looking to expand into places like Australia and Canada. Its main investment strategies focus on international shares, global shares, emerging market shares and US shares. Within those areas, it has some offerings that focus on dividend shares.
I think there are few companies on the ASX right now that have a high projected dividend yield and could grow a payout again in FY25.
Image source: Getty Images
Strong payouts from the ASX dividend stock
GQG pays dividends to shareholders every three months, so investors don't have too long to wait until the next dividend payment.
The ASX dividend stock is committed to a dividend payout ratio of 90% of its distributable earnings, which is a pleasingly generous amount.
According to the estimate on Commsec, GQG could pay an annual dividend per share of 14.7 cents for 2024. This would be a forward dividend yield of around 9%.
In FY25, the annual dividend is projected to increase to 16.2 cents per share, a forward yield of 9.75%.
Why I like the GQG share price valuation
GQG earns a vast majority of its profit from management fees rather than performance fees. The growth of funds under management (FUM) is, therefore, very helpful for growing earnings.
If the ASX dividend stock can deliver positive returns within the investment funds, it is an organic boost for the FUM, profit and dividend. And as long as the company sees net inflows rather than outflows, then underlying earnings growth is likely. (Inflows are when people invest more money with a company rather than take it out).
In the first 11 months of 2023, GQG experienced net inflows of US$9 billion, a positive for FUM. GQG's main funds have delivered strong long-term outperformance as well, which is useful for attracting and retaining FUM.
Using the estimate on Commsec, the GQG share price is currently valued at around 10x FY24's distributable earnings. This is a cheap price/earnings (P/E) ratio for a growing business in my eyes.
