Telus (TSX: T) and BCE Inc (TSX: BCE) are two perennial favourites among Canadian dividend investors. Despite their recent dividend cuts, both telco stocks offer high yields and seemingly modest valuations. Taking the income potential and low-ish multiples together, and it looks like either one of these stocks would be a no-brainer.
Unfortunately, looks can be deceiving. Telus and BCE both still have relatively high payout ratios even after their recent dividend cuts. Additionally, they are not growing their earnings very much, calling into question whether their valuations are really so cheap as they appear, and whether they’ll be able to hike their dividends going forward.
So, even after cutting their dividends and seeing their stock prices fall, Telus and BCE remain risky.
The good news is that there is still much available in the Canadian dividend stock landscape that is more attractive. There are even some telcos that are relatively attractive – though that’s not the pile I’ve been searching in. Instead, I’ve found attractive opportunities in financials, energy, and utilities. In this article, I’ll share one that I found appealing enough to invest some of my own money into.
Source: Getty Images
Brookfield Asset Management
Brookfield Asset Management (TSX: BAM) is one of Canada’s top financial services stocks and one of the world’s leading alternative asset management companies. The company’s stock has a 3.6% dividend yield and a solid track record of dividend increases (if we count the period before it was spun off from its parent company).
A massive opportunity set
Brookfield Asset Management is an alternative asset manager, meaning that it manages clients’ money in exchange for fees. It has deployed about $1.2 trillion worth of client assets into various investment opportunities and has tens of billions worth of committed but not deployed capital remaining to invest.
BAM has tended to invest its money into “hard assets” like real estate, infrastructure, renewables, pipelines, and utilities. More recently, it has been getting into tech and data centre-oriented investments. The company’s traditional alternative asset focus provides a lot of income and a hedge against potential frothiness in the tech sector, while its data centre investments profit directly off of the US and Canadian AI buildout. So, there is much diversification and optionality here.
Brookfield Asset Management is part of the broader Brookfield universe, which consists of a top-level conglomerate, a renewables company, an infrastructure company, an insurer, and more. The company tends to invest its own capital alongside its partners and fund holders, which aligns management interests with those of shareholders. So, the company has a lot of capital to work with, a lot of fee-bearing income, and a better-than-average ability to get deals done.
Significant growth
Brookfield Asset Management has been doing quite a bit of growing lately. In the most recent 12-month period, its revenue increased 31.3%, and its earnings increased 14%. Similar trends were observed in the trailing three-year period. As mentioned previously, the company has tens of billions in committed but not deployed capital still to deploy. That will eventually start generating fee-related income, driving more earnings growth in the future.
Foolish takeaway
The bottom line on Brookfield Asset Management is that it’s a quality dividend play that has growth characteristics as well. While the yield may not be as high as that of Telus or BCE, its dividend is more likely to grow than the dividends of either of those companies. So, BAM is a better value than the Canadian telcos today – and wins by a wide margin.
