Better Buy: Brookfield Asset Management Stock or Brookfield Infrastructure Partners?

Which top TSX stock, Brookfield Asset Management or Brookfield Infrastructure Partners, is a good buy right now?

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Large-cap TSX stocks such as Brookfield Asset Management (TSX:BAM) and Brookfield Infrastructure Partners (TSX:BIP.UN) offer investors a tasty dividend yield. While the dividend yield for BAM stock is 3.7%, BIP yields over 4.8%, making these blue-chip stocks an enticing investment option for long-term shareholders.

Moreover, both these Canadian dividend stocks have the potential to derive outsized returns via capital gains, too. Let’s see which TSX stock should be part of your equity portfolio today.

Brookfield Asset Management stock

An alternative asset management company, Brookfield Asset Management is valued at a market cap of $18.4 billion. BAM has around US$800 billion in assets under management, US$400 billion of which are fee-bearing in nature. Its fee-based earnings margin is between 55% and 60%, and 84% of these earnings are long-term, allowing the company to generate cash flows across economic cycles.

BAM aims to grow fee-based earnings by at least 15% annually in the medium term, which should result in consistent dividend hikes. It also seeks to distribute 90% of cash flows via dividends.

Brookfield Asset Management expects institutional investors to allocate 60% of their capital to alternative assets by 2030, up from just 5% in 2000 and 30% in 2021. As a result, the AUM for alternatives could increase to US$23.4 trillion in 2026, up from US$4 trillion in 2010.

BAM has a debt-free balance sheet and ended Q2 2023 with US$2.9 billion in cash. Investors expect the company to increase sales to $7.4 billion in 2024, up from $6.1 billion in 2023. Its adjusted earnings are also forecast to grow from $1.83 per share in 2023 to $2.23 per share in 2024.

Priced at 2.5 times forward sales and 20 times forward earnings, BAM stock is reasonably valued. The TSX stock has already surged 21% year to date and trades at a discount of 13% to consensus price target estimates.

Brookfield Infrastructure Partners stock

Brookfield Infrastructure Partners follows a thematic approach to investing, allowing the company to grow earnings at a consistent pace over the past decade. Down 24% from all-time highs, BIP stock has still returned 372% to shareholders since September 2013, after adjusting for dividends.

Around 70% of BIP’s funds from operations, or FFOs, are tied to rate-regulated structures, shielding it from volume and price risks. With a dividend payout ratio of less than 70%, BIP enjoys the flexibility to reinvest cash flows in capital projects, target accretive acquisitions, and raise dividends.

Armed with an investment-grade bond rating, the majority of BIP’s debt is fixed-rate in nature, with an average maturity of seven years, insulating the infrastructure giant from recent interest rate hikes.

Analysts tracking BIP stock remain bullish and expect shares to surge over 41% in the next 12 months.

The Foolish takeaway

Both Brookfield Asset Management and Brookfield Infrastructure Partners should be part of your holdings in 2023 due to their compelling valuation and wide economic moat. But if I have to choose a winner between the two, I would have to go with BAM stock as it offers investors substantial diversification.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Asset Management and Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

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