Brookfield Corporation (BN 0.35%) completed a three-for-two stock split earlier this week. The global investment firm split its shares to make them more accessible to individual investors and to enhance the trading liquidity of its stock.
Over the past 30 years, the company has completed several stock splits as a result of delivering a total return exceeding 27,000%. Brookfield has consistently outperformed the broader market, with a 19% annualized total return over the last three decades compared to 11% for the S&P 500. Looking forward, Brookfield expects to continue delivering strong growth, which could triple the value of its shares by 2030
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Brookfield: The wealth-creating machine
Despite its impressive returns, many investors aren't too familiar with Brookfield. The Canadian company is a leading global investment manager with three businesses:
- Asset management: The company owns a 73% interest in Brookfield Asset Management, a leading global alternative investment manager with over $1 trillion in assets under management (AUM).
- Wealth solutions: Brookfield Wealth Solutions is an investment-led insurance company that offers annuities, as well as property, casualty, and life insurance.
- Operating businesses: It owns interests in four global operating platforms focused on infrastructure (Brookfield Infrastructure), renewable energy (Brookfield Renewable), private equity (Brookfield Business), and real estate (Brookfield Property).
NYSE: BN
Key Data Points
These businesses generate significant and rapidly growing operating cash flows, enabling Brookfield to return capital to shareholders through dividends and share repurchases, while also allocating funds to enhance shareholder value.
Over the last five years, Brookfield has grown its distributable earnings at a 22% compound annual rate, raising them from $2 billion in 2020 to an expected $5.3 billion this year. This growth puts the company's intrinsic value at $102 per share (pre-split), well above the recent pre-split stock price of less than $70 a share. Over the past year, Brookfield has returned $1.5 billion to investors ($1 billion for share repurchases and $500 million in dividends), while retaining the remaining capital for reinvestment.
The plan leading to 2030
Brookfield expects to continue growing rapidly over the next five years. The company aims to deliver annualized total distributable earnings-per-share growth of 25% during this period. Within this, its core businesses should generate 20% annualized growth, with an additional 5% growth anticipated from capital allocation activities. As a result, Brookfield estimates its share value could increase at an annual rate of 16%, potentially rising to $210 (pre-split) by 2030 -- a projected increase of over 200% from current levels.
The investment firm anticipates that its wealth solutions business will be a significant growth driver through 2030, accounting for over one-third of its anticipated total growth. Management's goal is to grow its insurance assets from $135 billion currently to $350 billion by 2030, which it expects would more than double the platform's earnings in the next five years. Brookfield has been expanding this platform through acquisitions, most recently announcing an agreement to acquire Just Group for $3.2 billion, expanding its reach to the UK pension risk market.
Brookfield also sees robust future growth for its asset management business. The company anticipates capitalizing on growing investor demand for alternative investments, which typically offer higher returns and lower volatility compared to traditional asset classes. Many individual investors have relatively low exposure to alternatives, representing a major market opportunity given that they hold $40 trillion in wealth.
Finally, Brookfield generates significant free cash flow, providing capital to grow shareholder value. The company estimates that by 2030, it will produce $25 billion in cumulative surplus free cash flow after dividend payments and current capital commitments, which it can allocate to acquisitions, fund investments, and other opportunities.
A top stock-split stock to buy now and hold for the next five years
Brookfield Corporation has consistently demonstrated a remarkable ability to grow shareholder value over the years. As a result, it has had to split its stock several times, including earlier this week. More stock splits seem likely, given the company's robust growth profile. That makes it a great stock to buy post-split, as shares could triple in value from here by 2030.
