Are you looking for explosive growth potential in your investment portfolio? What if I told you there’s a company projected to grow earnings by 20% annually? Let’s dive deep into Blue Owl Capital, a rising star in asset management that is outpacing market expectations. We will explore their impressive growth rates, examine their dividend strategy, and compare them to industry giants. Is this the hidden gem that your portfolio needs? Join us as we uncover whether this could be your ticket to robust growth in earnings and future stock prices.
Introduction to Blue Owl Capital
Asset management can be a highly attractive sector for investors seeking both growth and income. Blue Owl Capital, a relatively new player in the industry, has been making waves with its impressive performance and growth projections. The company operates in several key areas, including business development companies (BDCs), real estate, GP capital solutions, and direct lending. Let’s take a closer look at each of these areas to understand what makes Blue Owl Capital stand out.

The Rise of a New Contender
Blue Owl Capital was formed through the merger of Owl Rock Capital Group and Dyal Capital Partners, combining expertise in direct lending and GP capital solutions. This strategic move has positioned the company to capitalize on market opportunities and deliver value to investors. With a focus on alternative asset management, Blue Owl Capital is tapping into sectors that traditional asset managers might overlook.
Analyzing Earnings Growth
Analysts are estimating earnings per share (EPS) increases of 20% each year for Blue Owl Capital. In the 2023 financial year alone, the company achieved a 23% increase in EPS, with expectations of a 22% increase in 2024 and continued strong growth thereafter. This fast rate of growth is impressive, but it also raises an important question: What are investors paying for this growth?
Price-to-Earnings Ratio Evaluation
Currently, Blue Owl Capital is exhibiting a price-to-earnings (P/E) ratio of 21 times. Is that reasonable? Considering the company’s high growth rate, a P/E ratio of 21 may be justified. However, it’s important to note that Blue Owl Capital is a relatively small company with a BBB S&P credit rating and a relatively high level of debt to capital. Additionally, the company doesn’t have an extensive operating history, making the analyst scorecard less reliable due to limited data.
Despite these factors, if the company continues on its current growth trajectory, investors could potentially earn about 25% per annum as a rate of return, which comprises both dividend income and share price growth in line with earnings. This potential return is attractive, especially when considering the combination of growth and income.

Dividend Growth and Strategy
An important aspect of Blue Owl Capital’s appeal is its dividend strategy. Analysts expect very strong dividend growth rates that could push the payout ratio to high levels by the end of 2025. For example, in 2023, the company increased its dividends by 27%, a substantial hike that is significantly higher than the S&P 500 average. In fact, Blue Owl Capital’s dividends are three times higher than those of the S&P 500, making it an attractive option for income-focused investors.
Sustainability of Dividend Growth
While such high payout ratios might seem unsustainable, it’s possible that the company will moderate or adjust its dividends to maintain financial stability. Blue Owl Capital may choose to reinvest earnings to fuel further growth, balancing the need for shareholder returns with long-term corporate health. Even so, if the P/E ratio remains at 21 times, investors could be looking at a 24% per annum return, which combines both growth and a reasonable dividend yield over time.
Performance Comparison with the S&P 500
Despite its short operating history, Blue Owl Capital has been keeping up with the S&P 500, largely due to its relatively large dividends. The company’s dividend yield and growth have been instrumental in attracting investors seeking higher returns compared to traditional index funds. This outperformance is noteworthy, especially considering the challenging market conditions in recent years.

Key Business Segments and Performance
Blue Owl Capital operates across three key business segments:
- Real Estate Assets Under Management
- GP Capital Solutions
- Direct Lending
Let’s delve into each segment to understand their contributions to the company’s growth.
Real Estate Assets Under Management
Blue Owl Capital has seen a recent increase in its real estate assets under management, reaching reasonable levels with solid growth rates. The company has significant exposure to industrial and logistics real estate, sectors that have been experiencing robust demand due to several secular trends.
Secular Trends Supporting Real Estate Growth
- Onshoring and Manufacturing Renaissance: The USA is witnessing a resurgence in manufacturing, leading to increased demand for industrial real estate. Companies are bringing production back to domestic facilities to reduce supply chain risks and leverage technological advancements.
- E-commerce Expansion: The growth of e-commerce requires extensive logistics and warehouse facilities. As consumers continue to shift toward online shopping, the need for distribution centers close to major markets has increased dramatically.
- Supply Chain Optimization: Companies are investing in modern logistics infrastructure to optimize supply chains. This includes adopting automation and advanced inventory management systems, which often necessitate new or upgraded facilities.
These trends have contributed to Blue Owl Capital’s success in the real estate sector. Additionally, the company’s net lease strategy has provided steady income and reduced downside risks, making it a stable component of their portfolio. Net leases often involve long-term agreements with tenants responsible for property expenses, providing predictable cash flows.
Portfolio Diversification
By focusing on industrial and logistics real estate, Blue Owl Capital diversifies its portfolio away from more volatile sectors like retail or hospitality. This strategic allocation mitigates risks associated with economic downturns that disproportionately affect certain real estate segments.
GP Capital Solutions
The GP Capital Solutions segment, which focuses on general partnerships, has shown solid performance, although growth has trailed off slightly in the last year. This area benefits from:
- Increasing Allocations in Investments: Investors are exploring different ways to create value, and GP capital solutions offer unique opportunities. General partners often seek capital to expand their investment capabilities, and firms like Blue Owl Capital provide tailored solutions.
- Consolidation and M&A Activity: The period of 2021-2022 saw significant mergers and acquisitions, supporting growth in this segment. As the asset management industry consolidates, opportunities arise for firms that can provide capital and expertise to growing entities.
Market Share Expansion
Blue Owl Capital has been able to capitalize on these trends, gaining market share and strengthening its position in the industry. By offering innovative solutions to general partners, the company establishes long-term relationships that can lead to recurring revenue streams.
Direct Lending
The Direct Lending segment is the largest and fastest-growing part of Blue Owl Capital’s business. There’s been a very strong long-term trend in direct lending due to:
- Abundance of Capital: A significant amount of additional capital in the marketplace seeking investment opportunities. Institutional investors, such as pension funds and insurance companies, are allocating more resources to private credit.
- Limitations in Public Markets: As public markets face constraints, private credit solutions become more attractive. Regulatory changes and market volatility have made traditional bank lending less accessible, creating a gap that direct lenders can fill.
- Wealthy Investors Seeking Alternatives: High-net-worth individuals are increasingly adopting private wealth and direct lending opportunities. These investors seek higher yields and diversification away from public equities and bonds.
Blue Owl Capital’s Success in Private Credit Solutions
Blue Owl Capital’s success in private credit solutions has been a powerful growth driver. The company has effectively deployed capital to grow investments over time, attracting investors looking for higher returns outside of traditional public markets. By providing flexible financing options to middle-market companies, Blue Owl Capital meets a crucial need in the economy.
Impact on Investor Portfolios
By offering direct lending and private credit solutions, Blue Owl Capital provides mechanisms for investors to drive growth in their portfolios. The company’s expertise in these areas has led to very strong growth in this space. Investors benefit from:
- Enhanced Yield: Private credit often offers higher yields compared to public debt instruments.
- Diversification: Exposure to assets uncorrelated with traditional markets.
- Inflation Protection: Some private credit instruments have floating interest rates tied to benchmarks like LIBOR or SOFR.

Secular Trends and Market Positioning
Blue Owl Capital’s growth is supported by several overarching secular trends:
- Industrial and Logistics Real Estate Demand: Driven by onshoring and e-commerce growth, the need for modern facilities is expected to continue.
- Private Credit Expansion: As companies seek alternative financing, private credit markets are expanding. This trend is global, with increasing opportunities in North America, Europe, and Asia.
- Investment Diversification: Investors are looking beyond traditional assets for higher returns. The low-yield environment in government bonds has pushed investors toward alternative assets.
Strategic Positioning
The company’s strategic positioning in these areas allows it to benefit from market dynamics and sustain its impressive growth rates. By focusing on sectors with strong secular growth trends, Blue Owl Capital reduces its reliance on cyclical market conditions.

Comparing Blue Owl Capital with Industry Giants
To gauge the potential of Blue Owl Capital, it’s useful to compare it with industry giants like BlackRock. While BlackRock is an established leader in asset management, its growth rates are more modest due to its size.
BlackRock’s Performance and Expectations
Analysts expect BlackRock to trade at about a 20 times P/E multiple, with future expected growth leading to a 12% total annualized rate of return. Historically, BlackRock has achieved a 9-10% EPS growth per year over five-year periods, which is consistent with its mature market position.
Blue Owl Capital’s Competitive Edge
In contrast, Blue Owl Capital, being a smaller and more agile company, has higher growth rates and the potential for significant returns. The company offers:
- Higher Dividend Growth Rates: With dividend increases of over 20% in recent years, far outpacing industry averages.
- Strong Earnings Growth: Projected EPS increases of 20% annually, indicating robust business expansion.
- Opportunities in Emerging Sectors: Focus on areas like private credit and direct lending, which have significant growth potential.
While BlackRock provides stability and consistent returns, Blue Owl Capital offers the potential for higher growth and returns, making it an attractive option for investors willing to take on more risk for greater reward.
Valuation Considerations
Given that both companies trade at similar P/E multiples, the higher growth rate of Blue Owl Capital could make it a more compelling investment from a valuation perspective. However, investors should consider the risks associated with the company’s size and shorter track record.

Long-Term Growth Prospects
Despite the lack of extensive historical data, Blue Owl Capital’s long-term growth prospects appear promising. The company’s aggressive growth strategy and market positioning suggest that the projected growth rates are achievable.
Factors Contributing to Long-Term Growth
- Market Trends: Continued demand for private credit and industrial real estate supports sustained growth.
- Strategic Investments: Effective deployment of capital in high-growth areas allows for compounding returns.
- Income Generation: Strong dividend yields attract income-focused investors, supporting the stock price.
Analyst Expectations
While long-term growth estimates are limited due to the company’s short history, the available data suggests that a 9-10% annual EPS growth over five years is reasonable, if not conservative. This aligns with historical trends in similar companies during their growth phases.
Risk Considerations
While the potential rewards are significant, it’s important to consider the risks associated with investing in Blue Owl Capital:
- Limited Operating History: Less historical data makes future performance harder to predict, increasing uncertainty.
- Higher Debt Levels: The company’s relatively high debt-to-capital ratio may pose risks if market conditions change, particularly if interest rates rise.
- Market Volatility: As a smaller company, Blue Owl Capital may be more susceptible to market fluctuations and economic downturns.
Mitigating Factors
However, the company’s focus on the established North American market reduces some of the risks associated with emerging markets. Blue Owl Capital doesn’t have significant exposure to Latin and South America, which can present challenges due to economic and political uncertainties.
Additionally, the sectors in which Blue Owl Capital operates—such as private credit and industrial real estate—are less correlated with traditional equity markets, potentially providing some insulation against broader market volatility.
Portfolio Considerations
For investors, Blue Owl Capital could serve as a growth element within a diversified portfolio. Its potential for high returns, combined with substantial dividend yields, offers a compelling case for inclusion.
Diversification Benefits
Including Blue Owl Capital in a portfolio can provide:
- Exposure to Alternative Assets: Access to private credit and real estate sectors not readily available through traditional investments.
- Income Generation: High dividend yields contribute to overall portfolio income.
- Growth Potential: Opportunity for capital appreciation due to the company’s aggressive growth strategy.
Alignment with Investment Goals
Investors should assess how Blue Owl Capital aligns with their investment goals and risk tolerance. Those seeking higher returns and willing to accept increased volatility may find the company an attractive option.
Conclusion: Is Blue Owl Capital the Hidden Gem for Your Portfolio?
Blue Owl Capital presents an intriguing opportunity for investors seeking explosive growth potential and strong dividend yields. The company’s focus on high-growth sectors like private credit, direct lending, and industrial real estate positions it well to continue outpacing market expectations.
With projected EPS increases of 20% annually and a P/E ratio that reflects its growth potential, Blue Owl Capital could offer returns of 24-25% per annum, combining both dividend income and share price appreciation.
While there are risks associated with investing in a smaller company with a shorter operating history, the rewards could be significant for those willing to include a growth element in their portfolio.
What do you think? Is Blue Owl Capital an interesting opportunity? Is this company on your watch list? If not, we’d be keen to know why. Share your thoughts and let’s discuss whether Blue Owl Capital could be the explosive growth asset your portfolio needs.