Brookfield Asset Management (BAM +2.92%), as its name very clearly indicates, is an asset manager. It has a market capitalization of $88 billion, which is fairly sizable. But it still pales in comparison to better-known peers like BlackRock and Blackstone, which have market caps of $150 billion and $165 billion, respectively.
The size gap here, however, is actually an opportunity. Here's why now could be a good time to buy shares of Brookfield Asset Management.
What does Brookfield Asset Management do?
As an asset manager, Brookfield takes money from other people and businesses and invests it for them. For providing this service, Brookfield charges a fee. The fee is normally a percentage of the assets that the company has under management. This is all normal for the asset management space.
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In Brookfield's case, however, it has both its own capital and the capital of other people to invest. So assets under management (AUM) isn't the right figure to watch. The key metric for Brookfield Asset Management is fee-bearing capital. To put these two figures into perspective, the company has a little over $1 trillion in assets under management, but only around $550 billion in fee-bearing capital.
Brookfield Asset Management's history is tied directly to infrastructure. It has an over 100-year track record of successfully buying, managing, and selling infrastructure assets on a global scale. Today, however, its business is increasingly diversified across so-called "alternative assets."
The company has operations in infrastructure, clean energy, and real estate, which are all fairly typical infrastructure assets. But it also has sizable operations in private equity and credit investing. That's five different platforms for growth. The company believes that it is positioned to benefit broadly from major global trends, including decarbonization, digitalization, and deglobalization.
Each of Brookfield Asset Management's different businesses benefits in different ways. For example, clean energy is a direct beneficiary of decarbonization, but so, too, is its infrastructure group. Real estate and infrastructure, meanwhile, will benefit from companies reshoring manufacturing and shifting their businesses more online. Private equity and credit can tap into all of those trends, by providing capital to companies as they adjust their businesses to keep up with the fast changing world.
Growth is the name of the game for Brookfield Asset Management
As noted, Brookfield Asset Management currently has around $550 billion in fee-bearing capital. By the end of the decade, it expects that figure to reach roughly $1.1 trillion. The plan is to roughly double just about every business in which it operates. The big takeaway here, however, is that doubling its fee-bearing capital will mean roughly doubling the company's fee income.
NYSE: BAM
Key Data Points
This is a growth story, but it is also a dividend story, too. Currently, Brookfield's dividend yield is an attractive 3.2%. That's more than double the yield of the S&P 500 and far above the 1.4% average for the finance industry. So it offers a lofty yield and potentially rapid business growth.
But that business growth is expected to have a positive impact on the dividend, too. Management is projecting 15% annualized dividend growth through 2030. This is a huge figure that will interest dividend growth investors. So Brookfield Asset Management is a growth investment, a yield investment, and a dividend growth investment.
Brookfield Asset Management is an attractive stock
To be fair, a lot rides on Brookfield Asset Management's ability to grow its fee-bearing capital. So execution will be very important if the company is going to live up to the lofty goals management has set. So, perhaps, conservative income investors might be better off elsewhere.
But more aggressive investors, including those with a dividend focus, would do well to do a deep dive here. You'll probably find you like this Canadian asset manager enough to add it to your portfolio right now.
