Brookfield Corp. (TSX: BN) just found itself on the receiving end of a few analyst upgrades over this past week.
Following the spin-off of Brookfield Asset Management (TSX: BAM) — the asset management business Brookfield Corp. still owns a big 75% stake in — many Canadian investors who owned BAM.A shares (as they were known before the spin-off) may be just a bit confused as to what happened, which stock to own, and the value to be had.
Betting big on alternative assets: BAM stock vs. BN stock
Indeed, Brookfield Asset Management is a leaner, asset-light play that could reward income-savvy investors with generous yield and solid dividend growth over time. While I’m a fan of both Brookfield companies in their post-spin-off era, I view Brookfield Corp. (BN shares) as the better bet for investors who enjoyed the operating income generated from real, hard assets.
Alternative assets are always a great place to look when times get tough. And over the years, it’s expected that such alternative (that is, alternative to equities) could continue to experience high demand from institutional and retail investors.
Undoubtedly, the Brookfield of old still resembles the new Brookfield Corp. For those seeking income, though, BAM stock is a great asset-management pure play. In any case, Brookfield Corp. still has a stake in the asset-management game, making it a fine selection for long-term investors who still want to invest in the best of both worlds.
If you’re like one of many BAM.A stock investors who are hanging onto BN and BAM shares post-spin-off, you’re not alone. The good news is you don’t really need to sell either. They’re both great investments for the long haul, and current valuations remain modest. However, if you are looking to put new money to work, BN stock seems very attractive following its latest stock slip.
Brookfield Corp. stock looks dirt cheap at these depths
After the spin-off, BN stock (or Brookfield Corp.) has been a huge laggard. The stock is fresh off of a 52-week low of around $39 and change per share. Credit Suisse slapped the stock with an upgrade earlier this month. More could follow, as investors look to the asset-heavy cash cow.
The stock trades at 8.4 times forward price to earnings. That’s way too cheap, given the type of high-quality alternative assets you’re getting from the name. Could it be the spin-off confused investors? Perhaps. Regardless, I think smart investors should look to BN stock at these depths before other analysts or investors recognize the value to be had in the name.
Yes, a recession is bad news for Brookfield. However, the depressed multiples, I believe, suggest such risks are baked in and then some. On the income side, you’re getting a 1.6% dividend yield. That’s pretty much in line with the old BAM.A.
While you may not get much upfront yield, you will likely enjoy plenty of dividend growth if you plan to hold the name for 10 years or more. As such, BN stock stands out as a dividend-growth play that’s most fit for young investors seeking TSX-beating results over an extended duration.
The bottom line for deep-value investors
Sure, the Brookfield “structure” has changed, but the wonderful company and managers are still running the show. And right now, the price of admission is close to the cheapest it’s been in quite a while!
