Dividend investors often gravitate toward high-yield stocks, but chasing big payouts can backfire. A yield that looks too good to be true often signals underlying business risks or the possibility of a dividend cut. So, how does an investor distinguish between a bargain and a trap? One way is to look at how a stock’s yield compares to its peers — and to the broader market.
Using iShares S&P/TSX 60 Index ETF as a proxy, the Canadian market currently yields roughly 2.6%. When a stock’s yield sits far above that level, caution is warranted. But when a company offers a modestly higher yield, supported by durable cash flows and strong long-term growth prospects, it’s often a sign of a true long-term compounder.
That’s exactly why I’m buying Brookfield Asset Management (TSX:BAM) — and why I plan to hold it forever.
A rock-solid dividend from a global giant
Brookfield Asset Management isn’t your typical dividend stock. With a yield of about 3.4%, it doesn’t scream “high income” — and that’s exactly the point. The dividend is backed by one of the most resilient and diversified earnings engines on the Toronto Stock Exchange (TSX).
As a world-leading alternative asset manager, BAM oversees more than US$1 trillion in assets under management, with about US$581 billion in fee-bearing capital. Its revenue streams are anchored by long-term contracts, globally diversified strategies, and stable, recurring fees. Because of this visibility, the company can comfortably target a 90% payout ratio — something that would be risky for most businesses but fits BAM’s model.
Even better, management expects 15–20% annual growth in earnings, powered by its ability to raise capital, such as from the world’s largest institutions — pension plans, sovereign wealth funds, insurers, endowments, foundations, and high-net-worth investors.
Its capital is pouring into global themes with decades of runway: digitization, deglobalization, and decarbonization. These aren’t fleeting trends; they represent structural forces reshaping the global economy.
A dividend growing at a double-digit rate
Since it was spun off from its parent company in late 2022, Brookfield Asset Management has already shown just how powerful its model is. The firm has grown its dividend at about 17% per year, and management remains committed to double-digit dividend growth going forward.
Recent results reinforce this momentum. In the third quarter of 2025 alone, BAM raised US$30 billion in new capital and deployed US$23 billion, driving meaningful increases in fee-related earnings. Year over year, fee-related earnings jumped 17% to US$754 million, while distributable earnings climbed 6.8%.
Looking at the trailing 12 months, the picture is even stronger:
- Fee-related earnings: up 19% to US$2.8 billion
- Distributable earnings: up 12% to US$2.6 billion
This consistent growth demonstrates why BAM isn’t just a dividend play — it’s a powerful total-return machine.
Buying on weakness for long-term outperformance
The stock has recently dipped, creating what I see as a good buying opportunity, as its long-term uptrend since the 2022 spinoff remains intact. At $72.65 per share at writing, the analyst consensus price target suggests the stock trades at roughly a 10% discount to fair value. For a company of BAM’s calibre, that’s more than reasonable.
With a sustainable 3.4% yield, robust double-digit growth prospects, and a business model built to thrive for decades, Brookfield Asset Management is the kind of stock I want to own indefinitely. Buy it on weakness, reinvest the growing dividends, and let the compounding do its work.
This is one TSX stock I’m buying — and holding — forever.
