brookfield asset management BAM.A

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Hi,

What is your thought on BAM.A as one of core holdings for a Growth and Income portfolio?

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Asked on May 22, 2020 11:36 am
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Hey there,

Brookfield Asset Management is one of the largest asset management companies in the world. It is the parent company to a suite of Brookfield companies including Brookfield Infrastructure (on our Bull list) and Brookfield Renewables (a Foundation stock).

The company is a difficult one to understand as it is constantly buying and disposing of different assets. However, it is one of the best names in the industry. Recent weakness is a result of its exposure to retail REITs, but overall it is a solid company.

As an asset company, book value is a good place to look at valuation. At 1.67 times book value - it is inline with historical averages. It is also trading at reasonable 16 times forward earnings, and analysts expect annual growth rates of approximately 14% over the next couple of years. This decent growth rate for a company of this size.

As for the dividend, it is a Canadian Dividend Aristocrat with an 8-year dividend growth streak and has raised dividends by an averaged of 7% annually. This is inline with its targeted dividend growth rate of 7-10% annually. Where it comes up short is in terms of yield. It only yield's 1.59% and the dividend growth rate isn't enough to make up the difference. Subsidiaries such as BIP and BEP have much more attractive yields and offer growth as well.

Typically, if I am going to an invest in a stock for income and it yield's less than 2%, I'd look for at least double-digit dividend growth - preferably 15%+.

Mat

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Posted by Mathieu Litalien
Answered on May 23, 2020 4:45 pm