Are you a retiree looking for good assets to put in your portfolio?
If so, I have a few suggestions for you.
First, you should put the bulk of your portfolio in index funds. These funds have low fees, and have been proven to outperform most active strategies over long timeframes.
Second, if you’re going to include individual stocks in your portfolio, you should focus on value, quality and management competence factors. Studies show that value stocks outperform growth stocks, and that quality and management styles significantly predict returns. In this article, I will explore two stocks that have value, growth, and competent management in spades.
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Brookfield Asset Management
Brookfield Asset Management (TSX:BAM) is a Canadian asset management company, a part of the Brookfield Corporation universe. It is best known for managing Brookfield funds and other pooled investment vehicles. The company has an asset-light business model, which means that it does not have many fixed assets to maintain or debt to service. As a result, it is usually very profitable, with high margins and returns on equity.
Just how high are Brookfield Asset Management’s margins and returns?
Here are some of its key profitability metrics for the trailing 12-month period:
- A 100% gross margin.
- A 77% operating margin.
- A 16.2% return on equity.
These are pretty solid numbers. The company’s net margin is not very high for the trailing 12-month period due to some accounting factors, but it has historically tended to be close to 50%. So, the long-term net margin trend is a good one.
Another thing that Brookfield Asset Management has going for it is a great reputation. It is known for being a good company to do business with and a trusted partner in deals. As a result, it usually has no trouble raising money for its funds.
Last but not least, Brookfield Asset Management is run by a great team. Brookfield CEO Bruce Flatt is one of the most accomplished financial sector CEOs of the last two decades, and Connor Teskey (BAM’s CEO) is also quite the go-getter. Overall, I’d expect great things from these two in the years ahead.
As for dividends: BAM’s payout works out to $1.52 annually, which provides a 2.9% yield at today’s prices. Not the highest yield out there, but one that has been growing over time.
Fortis
Speaking of dividend growth, it’s time to talk about Fortis Inc (TSX:FTS). Fortis is a Canadian utility company whose shares yielded 4% as of last Friday’s close. The company has increased its dividend every single year for 51 years, which makes it a dividend King. Fortis is well known for its sound financial management. Despite being a utility – a type of company known for high debt – it has usually kept its debt/equity ratio within reason. It has also pretty much always had a dividend payout ratio below 100%. So, it is a sustainable utility company that offers a decent amount of yield without pushing too hard to create a ridiculous amount of it. Overall, it’s a reliable stock.
