One group of investors that has had more than their fill of quantitative easing (QE) is income investors, who rely on investments that pay steady and dependable dividends or distributions that help supplement other sources of income. The whole point of QE was to drive down interest rates to make higher risk assets more attractive. While that has worked out pretty well for growth stock investors with long time horizons, income and growth and income investors were left with very little to cheer about.
In the early 2000s, large money center banks were offering certificates of deposit, guaranteed for principal up to $250,000, that yielded anywhere from 5% to 7%. Currently that is in the 2%-plus range. We screened the Merrill Lynch research universe for companies, not including destroyed energy master limited partnerships or business development companies, that offered higher yields. All these stocks are rated Buy at Merrill Lynch, and while they yield higher, they are not suitable for ultra-conservative income accounts.
This top investment firm has been mauled by the markets and could be offering an incredible entry point here. The Carlyle Group L.P. (NASDAQ: CG) is a global alternative asset manager with $193 billion of assets under management across 128 funds and 159 fund of funds vehicles as of June 30, 2015.
Carlyle invests across four segments — Corporate Private Equity, Real Assets, Global Market Strategies and Investment Solutions — in Africa, Asia, Australia, Europe, the Middle East and North and South America. Carlyle has expertise in various industries, including aerospace, defense and government services, consumer and retail, energy, financial services, health care, industrial, real estate, technology and business services, telecommunications and media and transportation.
While the Merrill Lynch team acknowledges that Carlyle probably had a difficult third quarter, and the share price reflects that, they think that it is an exceptional value now and provides investors a very solid entry point. They see assets under management growing and an increase in management fees and fee-related earnings.
Carlyle investors are paid a whopping 15.8% distribution. The Merrill Lynch price target for the stock is $23, and the Thomson/First Call consensus target is higher at $25.03. Shares closed Wednesday at $18.79.