Market turbulence should be expected for the rest of the year, as the recession moves in and inflation continues lingering around like indoor cigarette smoke. Despite the macro risks, I think value investors have a chance to capitalize on the return of volatility.
Indeed, volatility is a huge negative for many. It can keep a lot of investors on the sidelines. Those who are spooked by big ups and downs could run the risk of missing out on temporary moments on inefficiency in markets. Of course, buying dips hasn’t really resulted in quick gains in recent quarters. However, long-term investors should embrace volatility and ask Mr. Market for more of it. At the end of the day, turbulence can make DIY investors‘ jobs a bit easier, provided they have the discipline to hang in and act when most others are rushing to the sidelines.
It’s not easy to be a new investor these days. However, I think there’s a lot of benefit to being optimistic while others expect nothing but bad things to come, as economic headwinds and higher rates take a toll.
Brookfield Asset Management: Considerable dividend-growth potential
Currently, Brookfield Asset Management (TSX:BAM) stands out as one of the TSX stocks that may be unfairly ignored. The company, which resulted from the spinoff of the old Brookfield Asset Management with the ticker symbol BAM.A, is a very intriguing play for income-oriented investors who want a more asset-light model than the original Brookfield.
As you may know, the old Brookfield Asset Management is now broken into two publicly traded entities: Brookfield Corp. (TSX:BN) and Brookfield Asset Management. Brookfield Corp. is the closest thing to the original company, but with slightly less exposure to asset management. Meanwhile, BAM (or Brookfield Asset Management) is an asset-management pure-play.
Indeed, you no longer need to buy into the portfolio of real assets to get a piece of Brookfield’s asset-management business. Though I like Brookfield Corp. for its mix of cash flow-generative, “real” assets and its 75% stake in Brookfield Asset Management, I think the asset-management side isn’t getting enough love in today’s market.
A rocky ride post-spinoff
Post-spinoff, both BAM and BN stocks have been weighed heavily by weak broader market sentiment. Now off around 12% from its all-time high, Brookfield Asset Management stock stands out as a value play that many may be forgetting about.
The stock currently yields 4.11%. That’s rich for such a premier asset manager.
Looking ahead, Brookfield Asset Management could have the means to make a splash in mergers and acquisitions, as valuations across the financial sector sink lower. With the company shooting to grow fee-bearing capital (FBC) at a 15-20% CAGR (compound annual growth rate), I view Brookfield Asset Management as one of the TSX’s most promising dividend-growth plays.
Yes, there’s a limited history as a publicly traded entity, but with the brilliant Brookfield managers running the show, I think the BAM stock is one of the best asset management pure plays on the planet.
Bottom line
Brookfield Asset Management is a dividend gem for long-term investors seeking the perfect mix of dividends, growth, and appreciation. Between BN and BAM stocks, I think BAM is a must-watch for seekers of passive income.
