Oaktree has Record Earnings and a Double-Digit Dividend Yield

Following 2013 results that represent record highs for any quarter or six-month period in the Company’s history, Oaktree Capital Group, LLC (OAK) is an income investment for both growth and high income.  The stock just recorded a 63% increase in revenues and has a current dividend yield of 11.1%.  In this case, it is better to buy the stock of Oaktree Capital than to buy the closed-end funds it operates.

Oaktree Capital is a leading global investment management firm focused on alternative markets, with $76.4 billion in assets under management as of June 30, 2013.  The firm emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in distressed debt, corporate debt (including high yield debt and senior loans), control investing, convertible securities, real estate and listed equities.

In the second quarter of 2013, adjusted net income rose $131.5 million, to $297.0 million from $165.5 million in the second quarter of 2012, on a $214.0 million increase in total segment revenues. The 63% growth in revenues, to $555.1 million from $341.1 million, reflected a 162% gain in incentive income, to $338.1 million from$129.0 million, and a 49% increase in investment income, to $34.6 million from $23.2 million.

Driven by $4.7 billion of distributions to investors in closed-end funds, incentive income arose from funds in distressed debt, real estate and control investing strategies, and included $272.5 million from OCM Opportunities Fund.

Adjusted net income increased to $632.7 million for the six months ended June 30, 2013 from $339.1 million for the six months ended June 30, 2012, on a 74% rise in total segment revenues, to $1.1 billion.

Distributable earnings grew to $313.2 million in the second quarter of 2013 from $176.4 million in the second quarter of 2012, on higher incentive income and investment income proceeds.  For the six-month period, distributable earnings rose to $608.2 million in 2013 from $313.7 million in 2012. The 2013 results represented record highs for any quarter or six-month period in the Company’s history.

The stock still trades at a very reasonable valuation with the stock at a current PE of 9.45 and a price to sales ratio of 0.65.