Brookfield Asset Management’s share price has declined about 18% from its 52-week high.
The company’s long-term growth plans remain unchanged and are still highly attractive.
If Brookfield Asset Management can live up to its five-year plan, it could be a very attractive growth and income stock.
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Brookfield Asset Management (NYSE: BAM) is offering investors a dividend yield that is triple that of the S&P 500 index (SNPINDEX: ^GSPC). And the Canadian asset manager is targeting annual earnings growth rates of as much as 18%. If you are a growth and income investor, you should be paying very close attention to Brookfield Asset Management.
Brookfield Asset Management plans to increase earnings by roughly double during the next five years, taking fee-earning capital from $580 billion to $1.2 trillion. That’s an audacious goal, but it doesn’t come out of nowhere.
Between 2020 and 2025, management was able to increase the asset manager’s fee-earning capital from $277 billion to the current $580 billion. That resulted in fee-related earnings growth of roughly 15% a year.
Knowing that Brookfield Asset Management has doubled the size of its business before should give investors greater confidence in its ability to do so again. However, it is essential to remember that the company operates on Wall Street, and a bear market could impede its progress toward its longer-term goals. Of course, bull markets have always followed bear markets, so any setback is likely to be temporary.
It is also worth noting that Brookfield Asset Management’s business is diversified. It manages money across renewable power, infrastructure, real estate, private equity, and credit, serving small investors, larger investors, and institutional investors, such as insurance companies.
Overlaying these five business segments are the investment themes of decarbonization, deglobalization, and digitization. Management believes that these megatrends represent a $100 trillion opportunity.
Assuming that Brookfield Asset Management can achieve its business growth targets, which it has proven it can do, where does that leave the stock? That is a difficult question to answer, but you can get some insight if you consider the current and attractive 3.3% dividend yield.
Part of Brookfield Asset Management’s growth plan is to use its distributable earnings growth to power dividend growth. If distributable earnings growth rises at an 18% clip as forecast, then the company should have little difficulty increasing the dividend, on an annualized basis, at the 15% rate that it hiked the payment to in 2025. So, in about five years the dividend will have doubled, using the rule of 72 to get a rough estimate.
