While investing for the long term, say a decade, choosing the right stock can lead to remarkable returns. The key is to find stocks with solid fundamentals and significant tailwinds. Further, one should focus on companies that can deliver profitable growth and enhance shareholder value through cash dividends and share buybacks. Against this backdrop, let’s look at a top Canadian stock that has the potential to be the best investment of the decade.
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A top Canadian Stock to buy and hold
While the TSX has several fundamentally strong stocks with solid growth potential, Brookfield Asset Management (TSX: BAM) is a compelling bet. Its exposure to high-growth sectors, predictable earnings, asset-light balance sheet, and ability to reward its shareholders with higher dividend payments position it well to deliver strong total returns over the next decade.
The alternative asset manager is growing rapidly, with its fee-bearing capital expanding to $539 billion in the third quarter (Q3). This reflected an increase of about $100 billion or 23% year-over-year. Further, Brookfield Asset Management generated a record $644 million of fee-related earnings (FRE) and a record $619 million of distributable earnings (DE) in Q3.
Further, the company’s margins expanded by over 200 basis points to 58% in Q3, reflecting solid operating leverage.
While Brookfield has delivered solid growth, this momentum in its business will likely sustain in the coming years led by its strong fundraising across its flagship funds and complementary fund offerings. This will drive its stock price, which has already gained over 56% in one year.
Brookfield to deliver solid returns
Brookfield Asset Management is well-positioned to deliver solid returns led by its early investments in high-growth areas such as renewable power, AI infrastructure, nuclear energy, and semiconductor manufacturing. These sectors are likely to witness multi-decade investment cycles, generating solid returns.
The company is also witnessing higher monetization activity. This translates into significant capital returns for clients and creates a more favourable environment for fundraising. Moreover, with a high-quality portfolio that consistently outperforms industry peers, the company has built a strong foundation for solid growth, a trend that management expects to persist.
The market backdrop has also turned increasingly favourable for Brookfield. As interest rates stabilize and market conditions improve, yield-focused investments are regaining popularity. Brookfield’s publicly listed infrastructure and renewable energy affiliates are capturing renewed investor interest, translating into rising share prices. This momentum directly supports Brookfield’s earnings growth, share value, and dividend distributions.
Further, Brookfield’s balance sheet remains strong, with significant cash reserves and no debt. This financial stability enables the company to capitalize on growth opportunities, drive management fee growth, and expand its product offering.
Additionally, Brookfield Asset Management’s credit business is scaling rapidly. Brookfield now manages $245 billion in fee-bearing capital and targets to grow this figure to $600 billion within five years. Management also aims to double overall fee-bearing capital to $1 trillion, potentially driving over 15% annual earnings and dividend growth.
As Brookfield Asset Management strengthens its capital base and expands margins, the company is well-positioned for sustained earnings growth. Moreover, it will likely create significant value for its shareholders over the next decade.
