# Blackstone income tax



## Drauss (Nov 29, 2016)

Folks,

Anybody has any experience with Blackstone's lofty dividend payments in an RRSP account ?
I kind of like how private equity has been ignored and like to get in on it and Blackstone sports an 8% dividend.

Normally, a high yield is a sign of dividend cut, but when it comes to private equity, the market just doesn't like those complex entities hence the large discount. more to do with that then potential dividend cuts.


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## Drauss (Nov 29, 2016)

Drauss said:


> Folks,
> 
> Anybody has any experience with Blackstone's lofty dividend payments in an RRSP account ?
> I kind of like how private equity has been ignored and like to get in on it and Blackstone sports an 8% dividend.
> ...




any feedback on this question ?


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## twa2w (Mar 5, 2016)

Which specific Blackstone fund are you referring to.


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## Drauss (Nov 29, 2016)

twa2w said:


> Which specific Blackstone fund are you referring to.


Hi
The actual underlying stock
I have done some research and looks like the cash coming from that dividends is combination of interest, dividend, proceeds from funds etc etc and that it might not be covered under RRSP for Canadian for full tax exemption


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## twa2w (Mar 5, 2016)

This is not actually a stock but an lpu. Limited partnership unit.
It is eligible for RSP but I can't comment on the dividend breakdown and whether or not there might be witholding tax on a portion. Normally on US holdings in an rsp, there is no witholding tax on dividends but technically, I suppose, in this case they are distributions, not true dividends. Worst cae there may be some unrecoverable dividend on a portion of the distribution.
Note the distribution is erratic so the noted dividend rate may be inaccurate.

2016
Q1. 0.61
Q2. 0.28
Q3 0.36
Q4. 0.41

2017
Q1. 0.47
Q2 0.87
Q3 0.54
Q4 0.44

I think this is highly cyclical investment. It also appears to issue huge amounts of new units to fund investments, which dilutes existing unitholders.
While the dividend is good, how well will the underlying units perform? 
Is this the right time to get in?


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## james4beach (Nov 15, 2012)

Are you talking about Blackstone Group (BX) on the NYSE?

twa2w: total return looking at all distributions is about the same as the S&P 500 over the last decade, depending on where you start. Green is BX, black is S&P 500
http://stockcharts.com/h-sc/ui?s=BX&p=D&st=2007-09-01&en=(today)&id=p60484488392

If the BX distributions are causing a problem, it might be worth just switching to the S&P 500. Also notice the steep draw down in BX during the financial crisis, it fell as much as 86% at its lowest point, even factoring in distributions.


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## Drauss (Nov 29, 2016)

james4beach said:


> Are you talking about Blackstone Group (BX) on the NYSE?
> 
> twa2w: total return looking at all distributions is about the same as the S&P 500 over the last decade, depending on where you start. Green is BX, black is S&P 500
> http://stockcharts.com/h-sc/ui?s=BX&p=D&st=2007-09-01&en=(today)&id=p60484488392
> ...



Yes, BX is the one.


I am not jumping for its high yield. It is not an growth-dividend income play (as with Citi or BofA would be), rather than a value play, as most private equity companies seem to have that 'discount' on their share price and BX is not different. But what i like specifically is its political clout. Note that SoftBank and Blackstone were the two major firms that walked away with Saudi dollar investments. 

The existing shareholder that sold out were lucky to IPO right before the financial crisis. The new shareholder that bought in were unlucky to be stuck in a lost decade. The recent 2015 share price spike, i think has to do with monetizing big capital gains in some of their funds. Apparently, it recorded $4.4 bn in performance fee on top of its more predicable recurring management fee. The consequence of this erratic earnings is that, there is little value that investor put on future performance fee (which cannot be forecasted), whereas investors prefer to valuate against management fee.

Here some good portion of a recent FT article on BX that I read:

"With the BX IPO, ordinary investors had the chance to get a slice of the volatile but potentially massive incentive fees known as 'carried interest' that firms like BX rake in. Alternative managers typically charge 1-2 % to "limited partners", simply for finding and making deals. But the wealth creation opportunity came from the 20 per cent of gains the managers kept for themselves"

".... the big capital providers are writing bigger cheques to few firms. only the bigger firms can take $500m or $1bn at a time, accelerating the winner take all mentality"


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## Drauss (Nov 29, 2016)

Drauss said:


> Yes, BX is the one.
> 
> 
> I am not jumping for its high yield. It is not an growth-dividend income play (as with Citi or BofA would be), rather than a value play, as most private equity companies seem to have that 'discount' on their share price and BX is not different. But what i like specifically is its political clout. Note that SoftBank and Blackstone were the two major firms that walked away with Saudi dollar investments.
> ...



any reaction ?


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