The company is eyeing future growth.
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The Macquarie Group Ltd (ASX: MQG) share price is backtracking today following the company’s virtual Annual General Meeting (AGM) on Thursday.
At the time of writing, the investment bank’s shares are fetching for $157.02, down 0.70%.
Macquarie sets path to reinvest within the business
Investors have reacted to the news with the change in Macquarie’s strategy to reinvest its profits into the business.
According to an article published by the Australian Financial Review, Macquarie CEO, Shemara Wikramanayake gave a reason for the group’s dividend payout reduction.
The investment bank will cut its dividend payout policy range from 60% to 80% of earnings to 50% to 70% in 2022. While this may reflect a minor change, in reality, this equates to hundreds of millions of dollars.
Over the past 9 months, Macquarie has invested $3.8 billion in capital across its four operating groups. The company noted that roughly $600 million was put into Macquarie Capital to fuel growth. The other groups, Banking and Financial Services, Commodities and Global Markets, and Macquarie Asset Management also received their lion’s share.
Management revealed their reasoning noting that the dividend payout ratio has been about 56% in the past 2 years. Only once has the company paid out a dividend of more than 70% of its profit over the last decade. That was 2013 where Macquarie decided to reward shareholders with a payout ratio of 79%.
The additional leeway is expected to give the company the financial flexibility to pursue investment opportunities. Recent acquisitions such as United States funds management business, Waddell & Reed and AMP Capital’s Global Equity and Fixed Income business provides opportunities for growth.
Most notably, Ms Wikramanayake mentioned that mispriced assets in the current environment along with Macquarie’s working model is a proven formula. The company has been using this strategy, drawing on past experiences over the decades.
About the Macquarie share price
Emulating the economic rebound, Macquarie shares have continued their ascent over the past year, up 25%. In comparison, the S&P/ASX 200 Index (ASX: XJO) has similarly increased by 22%.
Macquarie commands a market capitalisation of around $57.6 billion, making it the 9th largest company on the ASX. The company has approximately 368.7 million shares outstanding
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.