Brookfield Asset Management's share price has declined approximately 18% from its 52-week high. The company's long-term growth plans remain unchanged and are still highly attractive, according to recent statements.
Brookfield Asset Management offers investors a dividend yield that is triple that of the S&P 500 index. The Canadian asset manager is targeting annual earnings growth rates of as much as 18%.
The company plans to increase earnings by roughly double during the next five years, taking fee-earning capital from $580 billion to $1.2 trillion. Between 2020 and 2025, management increased the asset manager's fee-earning capital from $277 billion to the current $580 billion, resulting in fee-related earnings growth of roughly 15% a year.
Brookfield Asset Management's business is diversified. It manages money across renewable power, infrastructure, real estate, private equity, and credit, serving small investors, larger investors, and institutional investors such as insurance companies. Overlaying these five business segments are the investment themes of decarbonization, deglobalization, and digitization. Management believes these megatrends represent a $100 trillion opportunity.
Part of Brookfield Asset Management's growth plan is to use its distributable earnings growth to power dividend growth. If distributable earnings growth rises at an 18% clip as forecast, the company should have little difficulty increasing the dividend at the 15% rate that it hiked the payment to in 2025. In about five years the dividend will have doubled, using the rule of 72 to get a rough estimate.
Dividend yield is a simple mathematical equation that divides the annualized dividend payment by the current stock price. Increase the dividend and keep the stock price the same, and the yield moves higher. To maintain the stock's current 3.3% yield, the share price would need to double.
Long-term investors are looking at an attractive yield today backed by a growing business. That growth will likely lead to dividend growth and share price appreciation.
Investors need to remember that five years is a long time on Wall Street. It wouldn't be surprising to see a bear market occur sometime between now and 2030. Don't let a bear market scare you out of Brookfield Asset Management or you could end up missing out when the market recovers.
Before you buy stock in Brookfield Asset Management, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now, and Brookfield Asset Management wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004—if you invested $1,000 at the time of our recommendation, you'd have $474,578. Or when Nvidia made this list on April 15, 2005—if you invested $1,000 at the time of our recommendation, you'd have $1,141,628.
Stock Advisor's total average return is 955%—a market-crushing outperformance compared to 196% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.