If you think you can do it better than the other guy, then you get in the game and do it. If the other guy, and a few of his friends, is running to the exit, so be it. Get on with it anyway.
In 2008, Ken Moelis thought he could do it better than the other guy (who was running to the exit). In Moelis’ case, the “it” was investment banking. To prove it, he formed the eponymous Moelis & Co. (NYSE: MC) and off he went.
The timing for an investment banker to test his mettle was hardly ideal. 2008 saw the worst financial crisis since the 1929 market crash. The crisis dropped the large Wall Street investment banks to their knees and took a few out for the count.
Moelis exploited the dislocation. From 2008 to 2011, he added 400 capable investment bankers and established a global platform across the world. Today, Moelis has 17 offices backed by 650 employees to serve North and South America, Europe, the Middle East, Asia, and Australia.
Ken Moelis took his company public in April 2014 . . . and nothing has changed.
Moelis & Co. continues to grow, and it continues to grow intelligently. Not a dime of its growth has been funded with long-term debt, which is zero. Capital structure remains strong with minimal financial risk.
And grow, it does. For the fourth quarter, Moelis reported $205 million of revenue, up 17% from the year ago-ago quarter. For the full year, Moelis reported $613 million of revenue, an 11% increase over 2015.
As for earnings, Moelis reported EPS of $0.66 for the quarter; EPS for the quarter was up 20% compared with the year-ago quarter. For the full year, EPS posted at $1.80, a 9% increase over 2015.
You can be sure that more growth is on the way . . . a lot more growth.
Growth has a way of perpetuating in a trusted investment firm. More clients demand alternatives to the large investment firms. They demand holistic advice from investment firms with global connectivity. They also demand a firm with full knowledge of mergers & acquisitions, recapitalization, and restructuring.
Moelis obliges on all accounts. It has attracted a blue-chip clientele that includes Dell (NASDAQ: DELL), Oracle (NASDAQ: ORCL), Petrobras (NYSE: PBR), Berkshire Hathaway (NYSE: BRK.b), and Heineken (OTC: HINKY).
This past week, Moelis attracted what might be the bluest of the blue chips. Moelis will advise Saudi Aramco on its impending IPO. Small potatoes this is not. Saudi Aramco’s IPO values the company at a minimum of $2 trillion. The IPO is expected to raise about $100 billion (only 5% of the company will be sold) and will surely elevate the Moelis brand.
Moelis Dividend Returns Capital to Shareholders
Growth is nice, but income distributed to income investors is nicer. Moelis is as much about income (for investors) as it is about growth. Management is committed to returning 100% of excess capital to shareholders. Dividends are the conduit management uses to return excess capital.
In 2016, Moelis paid $2.56 in per-share dividends. Since Moelis’ 2014 IPO, the quarterly Moelis dividend has increased to $0.37 per share from an initial $0.20 per share in 2014. The regular dividend ̶ currently paid at $1.48 per share annually ̶ has been supplanted with three special dividends. The last special dividend, paid Jan. 5, was $1.25 per share.
Moelis’ regular dividend produces a respectable 3.9% dividend yield on the $1.48 annual per-share payment (and this is after the share-price popped $4 on the Saudi announcement). But I expect to see another Moelis dividend increase over the next 12 months. I also expect to see another special-dividend declaration of at least $1 per share.
When special dividends are factored in, Moelis investors should receive a yield closer to 6.5% than to 3.9% on their investment.