You might recall that late 2022, Brookfield Corp (which used to be called Brookfield Asset Management and used to trade on the ticker TSX:BAM.A) spun out its asset management business as a publicly listed entity: Brookfield Asset Management (TSX:BAM). The parent company still owns about 75% of BAM, which shows it remains confident in the long-term outlook of BAM’s business.
BAM just reported its first-quarter (Q1) earnings results yesterday. Investors should consider accumulating shares, especially on weakness, as it provides promising results.
Without further ado, here are BAM’s recent results.
BAM’s recent results
In the quarter, Brookfield Asset Management increased its fee-related earnings by 11.2% to US$547 million, while its distributable earnings rose by 14.7% to US$563 million. On a per-share basis, they were increases of 10.0% and 13.3%, respectively — still good growth.
In the last 12 months, the global alternative asset manager’s fee-related earnings climbed 12.4% to US$2,162 million, and its distributable earnings rose by 10.5% to US$2,167 million. On a per-share basis, they rose 11.9% and 10.8%, respectively.
Perhaps investors expected even greater growth from the company, as the stock is down about 3% on the TSX at writing on the day of the earnings release. Investors should take the opportunity to buy on meaningful dips. Here’s why.
Strong demand
Brookfield Asset Management manages investments for institutional and retail investors alike. It highlights that it has “a 25-year track record of delivering strong, risk-adjusted returns by investing in high-quality assets” that form the backbone of the global economy. These critical assets are diversified across the following: renewable power and transition (12% of fee-bearing capital), infrastructure (22%), private equity (9%), real estate (23%), and credit and other (23%). Its assets under management are more than US$825 billion and growing.
The fact that the company raised close to US$100 billion of capital over the last 12 months (including US$19 billion of capital raising year to date) is proof that there’s strong demand for BAM’s offerings. Additionally, it’s almost closing its “fifth flagship infrastructure fund, which currently stands at US$24 billion, and [its] sixth flagship private equity fund, which sits at US$9 billion.”
It targets to generate compelling, long-term, risk-adjusted returns for its clients, which will also benefit the growth stock’s shareholders, because it earns fee-related earnings on more than half of its assets under management.
Dividends
For achieving certain return targets for its funds, Brookfield Asset Management also earns performance fees on top of the usual management fees. Its growing asset management base that leads to rising management fees — and, oftentimes, more performance fees — are expected to drive dividend growth — and a solid growth rate at that!
The stock offers a decent dividend yield of almost 4% for starters. Furthermore, as a business that has low capital spending that allows a high payout ratio of approximately 90%, it anticipates it can grow its dividend by 15-20% per year. From the company’s recent results, it’s probably safe to say that it should be able to grow its dividends by at least 10% per year.
Investor takeaway
Assuming the growth stock is fairly valued, based on its 4% dividend yield and 10% growth rate, investors can approximate long-term returns of about 14% per year. Better yet, analysts believe the stock trades at a discount of about 11% at $43.09 per share at writing.
At the end of Q1, BAM had US$3.2 billion of investable capital. Additionally, it had US$79 billion of uncalled fund commitments that it could deploy if it sees solid global investment opportunities in high-quality assets within its investment areas of expertise.
All in all, BAM is a good dividend stock to accumulate as part of a foundation for long-term growth whether you’re an income or total return investor. Don’t forget to check out other best Canadian stocks to buy to diversify your portfolio.
