Brookfield Asset Management (BAM +4.08%) is a large asset manager based in Canada. It recently increased its dividend by a huge 15%. And it believes it can keep doing that through to the end of the decade, or roughly five years. This has material implications for investors looking at the stock today. Here's what you need to know.
What does Brookfield Asset Management do?
As an asset manager, Brookfield Asset Management takes money from clients and invests it for them. The company's historical focus has been on infrastructure assets, but it has been branching out into other areas, notably credit investing, in recent years.
All in, the business is centered around what are often called alternative assets, which can include everything from collectibles to timberland. This is a segment of the asset management industry that is seeing increased demand.
Image source: Getty Images.
Brookfield Asset Management collects fees from its customers based on the amount of money it is managing. At the end of the first quarter of 2025, the company was overseeing about $550 billion in fee-bearing capital. That was spread across renewable power, infrastructure, private equity, real estate, and credit investments.
The two key takeaways here are that Brookfield Asset Management manages a lot of money, and it has five different investment approaches to generate growth.
And that's exactly that plan, with the company expecting to roughly double its fee-bearing capital to more than $1.1 trillion by 2029. Management believes that will support 15% annual dividend growth to the end of the decade. The current dividend yield is about 3.1%, an important number to keep in mind here.
NYSE: BAM
Key Data Points
Dividend yields as a valuation tool
Often, investors simply look at a dividend yield as a way to figure out how much income a stock will generate for them. That's a legitimate and accurate way to view a dividend, but it isn't the only "value" a dividend yield offers. Dividends tend to be consistent over time, much more so than earnings. And, thus, the dividend yield can end up being a useful valuation tool, as well.
That's proven out by the fact that stock prices often track along with dividends over time. Rising dividends lead to rising stock prices, and vice versa.
The chart of Coca-Cola (KO 0.47%) and AGNC Investment (AGNC +1.70%) highlights both sides of this coin. The end result is that stocks often trade within a yield range based on the way Wall Street views a company.
So what would happen to Brookfield Asset Management if the company lives up to management's dividend growth projections? For starters, today's quarterly dividend of $0.4375 would increase to about $0.88 per share in 2030. Basically, the dividend would double. There's a range of outcomes to consider from this point.
If the stock price stayed the same as it is today, the yield based on that higher dividend payment would rise to 6.2%, roughly double what the yield is today. That's one extreme, but the other possibility is that the stock price rises so that the yield stays around the same level as today, or 3.1%. To achieve that, the stock would have to increase from about $56 per share today to something around $112. That would mean a 100% increase in the price.
|
Brookfield Asset Management Dividend Projection | ||||||
|---|---|---|---|---|---|---|
|
Year |
2025 |
2026 |
2027 |
2028 |
2029 |
2030 |
|
Dividend |
0.4375 |
0.503 |
0.579 |
0.665 |
0.765 |
0.880 |
Data source: Brookfield Asset Management and analyst estimates
So, as investors examine Brookfield Asset Management today, there are three ways to look at the stock.
First, given the S&P 500's (^GSPC +0.54%) tiny 1.3% yield, Brookfield Asset Management is a high-yield stock right now. But if management lives up to its business growth plans, it will also be a growth stock. On top of that, if the company increases the dividend as expected, it will also be a dividend growth stock. All this means a lot of investors will find Brookfield Asset Management of interest.
Where will Brookfield Asset Management be in five Years?
If management is able to increase Brookfield Asset Management's fee-bearing capital as it hopes, the company will be roughly twice the size it is today in five years. The dividend will likely be twice the size, as well. And if the stock market works the way it normally does with dividend stocks, that suggests the stock price will materially appreciate during the next five years.
Yes, dividend investors will need to keep a close eye on how well Brookfield Asset Management executes. But if it is anywhere close to its targets, there's a lot of good news ahead here.
