Blackstone Group LP (NYSE:BX) is one of the market’s rare winners this year, with a modest 0.3% return since Jan. 1. On top of that, Blackstone stock’s total return is even more attractive when you factor in its juicy 8.2% dividend yield.
So what makes BX stock such a strong bet?
If you’re unfamiliar, the Blackstone Group is a global asset management company. In addition to offering mutual funds and hedge fund services, BX has a very successful private-equity arm that snaps up value plays and squeezes cash out of them at a steady rate.
Some of the investments in the Blackstone portfolio include a stake in footwear company Crocs (CROX) and a big part of natural gas master limited partnership Cheniere Energy (LNG). Most recently, Blackstone made a major acquisition of BioMed Realty Trust (BMR), a company specializing in laboratory and medical office space, for over $4.8 billion.
While these plays seem disparate, the key factor they all share is the potential for reliable revenue and the ability to provide consistent cash flows — a crucial part of supporting Blackstone’s big dividend yield.
Take a look at this chart showing the last few years of BX stock financials (h/t Seeking Alpha), and you’ll see that the company is consistently growing revenue and margins at an impressive rate.
Now, there’s always a chance that Blackstone could stumble if its underlying investments stop performing as well as they have. However, with a five year return of 160% — and that’s share appreciation alone, mind you — investors have plenty of history to prove that Blackstone has staying power.
Now, obviously a market meltdown will be painful in the short term for many investors. But BX has the benefit of being able to make bargain-priced acquisitions if asset prices decline, which is a bit of a hedge against current volatility if you’re worried about a downturn.
So when you add up the big dividend and the big deal-making potential, it seems that Blackstone is one of the safest bets out there for long-term investors.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.
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