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!

| More on:
The Motley Fool

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.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »