A Once-in-a-Generation Investment Opportunity: 1 High-Yield Dividend Stock to Buy Now and Hold Forever This May

Brookfield Asset Management is a high-dividend TSX stock that can help you outpace the broader markets in the upcoming decade.

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Increasing yield

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Investing in high-yield dividend stocks can help you benefit from a stable stream of passive income as well as long-term capital gains. So, it’s essential to identify companies that offer shareholders a tasty dividend yield that is sustainable across business cycles. Moreover, these companies should grow earnings and cash flows over time, which translates to consistent dividend hikes.

One such high-yield TSX dividend stock to buy now and hold forever this May is Brookfield Asset Management (TSX:BAM).

An overview of Brookfield Asset Management

Valued at US$15.8 billion by market cap, Brookfield Asset Management is among the largest global alternative asset managers, with more than US$925 billion in assets under management across clean energy, private equity, real estate, credit, and infrastructure.

It invests client capital focusing on real assets and essential service businesses that form the backbone of the global economy. Brookfield Asset Management offers a range of alternative investment products, including public and private pension plans, endowments, sovereign wealth funds, insurance companies, and private wealth investors.

How did BAM perform in Q1 of 2024?

According to Brookfield Asset Management, liquidity is returning to capital markets as major economies are performing better than expected. A strong global economy generally translates to higher risk appetite, allowing BAM to raise US$20 billion in capital in the first quarter (Q1) of 2024.

Brookfield Asset Management ended Q1 with US$552 million in fee-related earnings and US$2.2 billion in the last 12 months, which is in line with prior-year numbers. Its distributable earnings stood at US$547 million or US$0.34 per share. Comparatively, BAM pays shareholders a quarterly dividend of $0.38 per share, which suggests its payout ratio is over 100%.

Brookfield Asset Management ended Q1 with fee-bearing capital of US$459 billion, up 6% year over year and US$2 billion higher from the prior quarter. Its increase in fee-bearing capital allowed it to increase fee-related earnings by 4% in the last 12 months.

Brookfield Reinsurance recently completed its acquisition of AEL. BAM stated it will manage AEL’s US$50 billion of capital, bringing its insurance-related fee-bearing capital to US$90 billion. Additionally, Brookfield Asset Management finalized an agreement to acquire a majority stake in Castlelake, a private credit manager with US$22 billion of AUM.

A growing dividend

In Q1 of 2024, Brookfield Asset Management deployed US$11 billion of capital into investments across large-scale, high-quality businesses and assets. It deployed US$2.8 billion of capital across its infrastructure platform and US$6.2 billion across credit funds.

BAM ended Q1 with US$106 billion of uncalled fund commitments and US$2.6 billion in cash, providing the asset manager with enough dry powder to invest aggressively when the opportunity arises.

An expansion of BAM’s AUM should help it increase cash flow and dividends over time. In the last 12 months, it has already raised dividends from US$0.32 per share to US$0.38 per share, indicating a forward yield of 3.8%.

BAM stock is forecast to increase adjusted earnings from US$1.37 per share in 2023 to US$1.45 per share in 2024. Given consensus estimates, BAM should end 2028 with adjusted earnings per share of US$2.8. If BAM stock is priced at 25 times forward earnings, it should trade at US$70 in the next four years, indicating an upside potential of over 80% from current prices.

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. The Motley Fool has a disclosure policy.

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