KKR dividend hits high but earnings drop
US private equity giant KKR posted a slump in a key profitability measure last night but told investors it would pay a record cash dividend.
Fourth quarter economic net income dropped 60 per cent year-on-year to $285.5m, underlining the challenges facing buyout groups when they go public.
Scott Nuttall, head of KKR’s global capital and asset management group, said: “We continue to see good progress in 2011, but the funds grew less in 2011 than in 2010 and that is why you see the earnings down.”
The group will make a fourth quarter payout of 32 cents per common unit, bringing its 2011 dividend to 72 cents, an all-time high.
KKR, the owner of Toys R Us and internet domain registration firm Go Daddy, derives its income from fees it charges its fund investors to manage assets and execute transactions and its share of the investment profits of its funds, known as carried interest.
Fee-related earnings were $116.6m in the fourth quarter, up 22.6 per cent from a year ago. Carried interest, realised when a deal is completed and tied to the performance of assets, fell 75.7 per cent to $54.1m in the quarter.
This is not just because economic turmoil eroded the profitability of its companies, but also because market volatility held back its funds from appreciating at the same fast pace as in 2010.