NEW YORK (
Since famously going public at a gaudy $31 per share in the exuberant summer of 2007, the performance of
The Blackstone Group's
stock has been a disaster. But the past 52 weeks have been a different story, and that may bode well for 2010.
The shares finished Dec. 15 at $13.40, more than a double in 2009 yet still down more than 50% since their debut, and the pundits who claimed the offering was an example of smart money cashing out at the right time may be justified in their derisive smiles. But where the stock began its public life a little more than two years ago should have little bearing on where it goes from here, and the current price may allow investors to get in with the so-called smart money on the way back up. Especially considering how well the shares have done since plumbing a low of $3.55 in late February.
Chief among the positives for Blackstone headed into the new year is the considerable dry powder it's able to tap, roughly $27 billion, executives estimated when the
that topped Wall Street expectations in early November. That means the company has plenty of money to put to work at today's deflated valuations, while much of the rest of the world is still enduring the healing process and hoping the economy continues to recover.
Within that $27 billion figure is $12 billion to put to work in real estate deals, and about $12.6 billion slated for buyouts. The company also has exits on its mind, and is betting on a continued resurgence in the IPO market in 2010, as it's planning as many as eight offerings from among its portfolio companies.
For a retail investor, Blackstone offers unique global and sector exposure, as it invests across the world and in a variety of industries. While the company's financial statements can be difficult to parse due to the long-term nature of its investments, the yield from the $1.20 annual distribution alone -- currently nearly 9% on a forward basis in relation to the Dec. 14 close -- is pretty compelling.
Compare that to dividend yields of 2.5% for
; 2.9% for
; and 3% for
In comparison to other financials, Blackstone looks particularly generous as companies like
Bank of America
, for instance, have comparable yields of just 0.30% and 0.80% respectively, having had to cut their dividends to the bone in order to build up liquidity and pay back bailout funds from the government.
, also a TARP payback poster child of late, doesn't pay any dividend at all.
It's no government-backed bond, of course, but, possibly because of their own bias as investors, Blackstone's braintrust has shown itself acutely aware of the importance of the letting the money trickle down to investors. The company didn't pay its quarterly distribution of 30 cents a share to stockholders in the fourth quarter of 2008 when panic from the financial crisis was arguably at its most fevered pitch, but it has done so since then. Blackstone also put in place a priority payout policy for common stockholders to be paid ahead of company personnel through 2009.
The actual payout isn't set in stone at $1.20 per share annually, it's based on adjusted cash flow from operations being sufficient to meet that obligation, but through the third quarter, Blackstone has kept pace, and given the economy's relative stabilization in the past year, there's no reason to think the payout would be threatened without macro conditions taking a dire turn for the worse.
Blackstone has already ramped up deal activity over the past few months -- most recently when portfolio company Pinnacle Foods Group inked a deal to acquire Birds Eye Foods Inc. for $1.3 billion in mid-November -- and it's got the firepower and desire for more of the same in the coming year.
In fact, judging by recent comments from Chairman and CEO Steven Schwarzman, the company is already concerned about another credit bubble coming along and ruining everything.
"What we don't want is to have too much money around and have the prices run up and then have the bozos able to do deals again," he told the audience at a conference sponsored by Goldman Sachs on Dec. 9, according to
. "When every fool can get rich, it doesn't work well for firms like ourselves."
Guess there's no doubt who Schwarzman thinks the smart money is.
Written by Michael Baron in New York.