The Carlyle Group (Nasdaq: CG) is a massive investment firm with $435 billion in assets under management.

It pays a $0.35 per share quarterly dividend, which gives the stock a yield of 3.5%.

The company has a stellar reputation as an investment manager… but how trustworthy is its dividend?

As always, we’ll start by looking at cash flow. The measure of cash flow that Carlyle reports is distributable income.

Over the past few years, the company’s distributable income has fallen sharply, declining from $2.2 billion in 2021 to $1.9 billion in 2022 to just $1.4 billion last year. But this year, it’s expected to bump back up to $1.6 billion.

Carlyle paid out $498 million in dividends in 2023 for a low payout ratio of just 35%. This year, it will likely pay shareholders around $528 million, which would drop the payout ratio to 33%.

That means the company can easily afford its dividend, as it is only paying out $1 for every $3 it earns.

From 2015 to 2019, the company’s dividend was variable, which means there are lots of cuts on its record.

But for the past four years, it has been paying a steady dividend. After paying $0.25 per share each quarter in 2020 and 2021, it boosted the dividend to $0.325 in 2022 and to $0.35 in 2023, which is where it stands today.

This is a case where it pays to have a human looking at the numbers and understanding what’s going on. Because the dividend was variable, these “cuts” weren’t truly reductions, so I’m going to exclude them from the rating.

The Carlyle Group can easily pay its dividend right now, so I don’t expect the company to lower the payout in the near future.

What is concerning, though, is the downward trend of its distributable income. Shareholders will want to keep a close eye on that, because if distributable income continues to slide, a dividend reduction could be in the cards.

Dividend Safety Rating: B

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