The best dividend stocks offer you the potential to generate returns via a steady stream of passive income and long-term capital gains. As the dividend yield and stock price are inversely related, you should identify quality companies that have pulled back in recent trading sessions to benefit from an elevated yield.
One such blue-chip TSX dividend stock is Brookfield Asset Management (TSX:BAM). Valued at a market cap of more than $100 billion, BAM stock went public three years ago and has since returned 86% to shareholders. Despite these market-beating returns, the TSX stock is down 15% from all-time highs and offers you a yield of 3.3%.
The bull case of investing in this TSX dividend stock
Brookfield Asset Management is riding a wave of record momentum as it capitalizes on three powerful trends reshaping global investment: the buildout of artificial intelligence infrastructure, the retirement savings crisis, and a recovering real estate market.
The firm reported its strongest fundraising period ever in the third quarter, raising US$30 billion and bringing total capital inflows over the past year to over US$100 billion. Fee-related earnings climbed 17% to US$754 million while fee-bearing capital reached US$581 billion.
The asset manager sees a massive opportunity in AI-related infrastructure and estimates that investments will exceed US$7 trillion over the next decade.
AI and beyond
Brookfield is launching a first-of-its-kind AI infrastructure fund that integrates its relationships with major tech companies, real estate expertise, and a leading position in energy infrastructure. This comes as data centers become enormous electricity consumers, driving unprecedented demand for power generation.
The firm recently announced a US$80 billion partnership with the U.S. government to construct new nuclear reactors using Westinghouse technology, positioning Brookfield at the center of clean baseload power expansion.
Management is equally bullish on wealth solutions as aging populations in Western markets create structural demand for retirement products.
In the United States, one in six people is now over 65, a figure that is expected to increase to one in four by 2050. Meanwhile, defined benefit pension plans have largely disappeared, leaving individuals responsible for their retirement security.
Brookfield’s insurance platform grew from zero to US$135 billion in assets over five years, generating US$1.7 billion in distributable earnings while maintaining returns above 15%.
The real estate recovery is gaining traction after years of sectoral challenges. Transaction volumes are increasing, and capital markets are showing renewed strength. Brookfield deployed US$30 billion in infrastructure and renewable power over the past year while monetizing more than US$10 billion at approximately 20% returns.
The firm expects to sell roughly US$24 billion of real estate assets during its planning period while maintaining portfolio occupancy above 94%.
What is the BAM stock price target?
Brookfield Asset Management anticipates its fee-related earnings will increase to nearly US$6 billion by 2030. Analysts tracking the TSX stock forecast revenue to grow from US$3.98 billion in 2024 to US$6.90 billion in 2027.
In this period, adjusted earnings are forecast to expand from US$1.45 per share to US$2.16 per share. A widening earnings base will enable the Canadian giant to raise its annual dividend from US$1.52 per share in 2024 to US$2.18 per share. It suggests the effective yield of the TSX stock could expand from 3.3% in 2025 to 4.1% in 2027.
If the TSX dividend stock is priced at 28 times forward earnings, which is in line with its historical average, it could surge 13% over the next 15 months. If we adjust for dividends, cumulative returns should be closer to 17%.
