The Carlyle Group: Value Investor's Dream

Focus: FINANCIALS

Todd Shaver Image Todd Shaver Founder and Editor-in-Chief, BullMarket.com

One of the world’s largest private investment firms, The Carlyle Group LP (CG) owns 250 companies and boasts more than $160 billion in assets under management, observes Todd Shaver, growth and income expert and editor of BullMarket.com.

Activities include management-led  buyouts, minority equity investments, real estate, venture capital, and leveraged finance opportunities.

There are two reasons that Carlyle’s shares have been a major disappointment in recent years, but all that is about to change, making Carlyle Group’s stock a value investor’s dream.

First, the business model is very complex. Carlyle executes complex transactions with long investment-cycles. It can take 7+ years for Carlyle to raise money, invest it, exit the investment, and finally give back the money to investors with a return.

Wall Street does not like the lack of visibility here, or anywhere for that matter. But all that is changing. Each passing quarter that Carlyle pays the dividend, proves the business is printing profits month in and month out.

The company paid out a dividend of $1.69 in 2013, $2.01 in 2014, $2.19 in 2015, and $1.81 in 2016. This is an absurd greater-than-10% yield at current levels.

Second, with the post-election focus on comprehensive tax reform, the topic has been raised as to whether Carlyle Group should be contemplating converting to a C Corp from a publicly traded partnerships (PTPs).

Alternative Asset Managers pass through certain qualifying income untaxed at the corporate level (e.g., carried interest, investment income, interest/dividends).

Accordingly, shareholders receive a K-1 and have to file taxes on that income on their own.