How to Get Income Without Giving Up Growth

Why choose between income or growth when you can get both? Consider Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY) as an income-growth investment today!

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Stock prices are unpredictable. Moreover, they can be affected by macro news. For example, in a recession the share prices of even the best companies can be dragged down significantly.

That’s where companies with rich, stable, growing dividends come in. These companies have strong fundamentals and the financial strength to maintain or even grow their dividends during dire economic conditions.

These companies offer decent growth without investors having to give up income. These companies yield 4-6% with dividend-growth potential. Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY) is a prime example of such companies.

The business

Brookfield Property is a global owner, developer, and operator of a diversified, quality real estate portfolio.

It has about 83% of its portfolio in core assets, including 149 premier office properties totaling 101 million square feet in gateway markets around the world and 128 best-in-class retail properties totaling 125 million square feet throughout the U.S. (via 34% fully diluted interest in General Growth Properties Inc.).

Furthermore, it has about 17% of its portfolio in opportunistic investments, including high-quality assets with higher upside potential across multifamily, industrial, hospitality, triple net lease and self-storage sectors.

Brookfield Property was established in 2013 to consolidate all of Brookfield Asset Management Inc.’s (TSX:BAM.A)(NYSE:BAM) real estate assets under one company.

Brookfield Asset Management owns about 62% of Brookfield Property. As an aligned manager and operator with skin in the game, unitholders can count on management to create value over the long term.

Since the company invests globally, it can invest for the best risk-adjusted returns when it has capital to deploy.

Brexit impact

The company has about 15% of assets in the United Kingdom and Europe. In the Evercore ISI 2016 Real Estate Conference on September 8, the Brookfield Property CEO, Brian Kingston, said that it could take six to 12 months to see the Brexit impact on its U.K. portfolio. A slowdown is expected in the near term. However, the company continues to believe in the U.K. as a long-term investment.

Growing income

Brookfield Property offers a sustainable yield of 4.9%. And it anticipates to grow it at an average rate of 5-8% per year based on its estimated funds from operations per unit growth of 8-11% per year.

Conclusion

At about US$23 per unit, Brookfield Property trades at a 23% discount from its IFRS value per unit.

Investors can get an above-average yield of 4.9% with the expectation of steady price appreciation over time as the company is focused on long-term value creation.

Additionally, Brookfield Property aims to increase its distribution per unit by 5-8% per year and targets long-term return on equity of 12-15%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of Brookfield Property Partners. The Motley Fool owns shares of BROOKFIELD ASSET MANAGEMENT INC. CL.A LV.

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