Invest in Gluskin Sheff + Associates Inc. for its 6% Dividend Yield and More

Gluskin Sheff + Associates Inc. (TSX:GS) will continue to benefit from a growing high-net-worth market.

The Motley Fool

In a world of increased competition from the big banks, competition from ETFs, fee pressure, and increased regulatory risks, Gluskin Sheff + Associates Inc. (TSX:GS) stands out.

Gluskin Sheff is a $525 million market capitalization wealth management firm that is focused on high-net-worth clients and some institutional money, both of which are not subject to the previously mentioned risks.

The company’s revenue consists of management fees plus performance-based fees as certain rates of return are met. With $8.7 billion in assets under management, the company is well positioned to continue to take advantage of the secular trend of an aging population and greater wealth accumulation.

Between 2012 and 2016, the company’s revenue has increased 82.6%, which represents a cumulative average growth rate of 12.8%, and net income has almost doubled.

The business model is very profitable, as is evident when we look at the net margin of almost 30% that was achieved in 2016. It is also a business that has very high returns, with a 2016 return on investment and return on equity of over 30%. Yet the stock has a three-year return of 44%.

But it wouldn’t be fair to just look at the stock price because the total return (including dividends) looks much brighter.


The company currently pays a dividend of $1 per share. Throughout the years, the company has paid a regular dividend plus a performance-based special dividend when appropriate. The dividend yield currently stands at 6%, and the payout ratio is 85%.

Co-founder arbitration

One issue that has been an overhang on the stock has been the arbitration that has been going on related to the co-founders’ post-retirement compensation and benefit agreements. Together, the co-founders are seeking payment of almost $200 million, which is material to the company. This has understandably put pressure on the stock price, but it also has affected fund flows in the sense that clients and/or potential clients see this as a potential risk and are waiting for a resolution and more certainty.

The company has put cash aside for this and currently has over $43 million in cash and cash equivalents on its
balance sheet.

Deploying cash

Management has clearly stated their intention to hold on to this cash up until the settlement of the arbitration process. After that point, possible uses of cash would continue to be special dividends and share buybacks.

I would note at this time that the company carries no debt on its balance sheet, and with the acquisition in 2014 of Blair Franklin having gone well, with the full integration being complete, it would not be a stretch to think that another such acquisition could be in the company’s future.

In summary, although it would be right to be concerned with regard to the markets these days, here we have a company that has been a consistent and high performer, and it should continue to benefit from the bigger secular trend that still exists.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Karen Thomas has no position in any of the companies mentioned.

More on Dividend Stocks

Specialty Brands faces higher raw materials costs.
Dividend Stocks

What’s Next for Premium Brands Stock?

Shares of the specialty food production and distribution company have fallen about 25% since last October.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

2 Interesting Buys in Any Market

Here are two intriguing buys in any market climate that offer defensive appeal as well as growth and income earning…

Read more »

Dividend Stocks

TFSA Investors: 3 TSX Stocks for Tax-Free Passive Income

These Canadian corporations have strong visibility over future earnings and dividend payouts.

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Dividend Stocks

Lazy Landlords: 3 Cheap Canadian REITs to Buy in May 2022

You can become a passive landlord today by investing in Canadian REITs. Here are three cheap REITs to consider this…

Read more »

Target. Stand out from the crowd
Dividend Stocks

4 High-Yield TSX Stocks to Buy Ahead of Their Ex-Dividend Dates

If you have some cash lying idle, consider these high-yielding TSX stocks.

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Passive Income: 3 TSX Stocks With Rapidly Growing Dividends

Worried about inflation? Here are three passive-income stocks to buy that pay rapidly growing dividends.

Read more »

Family relationship with bond and care
Dividend Stocks

Retirees: 4 Safe Stocks to Buy for Decent Passive Income

Retirees can offset the impact of runaway inflation by buying safe dividend stocks to create more cash flows.

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

3 Canadian Energy Stocks to Buy for Reliable Passive Income

Canadian energy stocks are gushing cash. Here's three top stocks that are perfect buys for reliable passive income.

Read more »