Brookfield Asset Management (BAM +1.33%) is both a dividend stock and a growth stock. For many investors, it will be an attractive investment option right now. Here's what you need to know before you buy it.
Brookfield Asset Management's growth story
Brookfield Asset Management is a large Canadian asset management company. It generates income by charging fees for investing money on behalf of its customers. The fees are a percentage of the dollar value of the assets it manages.
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Normally, the key figure to monitor is assets under management (AUM); however, Brookfield Asset Management handles a significant amount of its own money. Thus, it breaks out a figure called fee-bearing assets. That's the number to monitor here, and management is expecting to double the figure by 2030, taking it from roughly $560 billion to $1.2 trillion.
The company plans to leverage a focus on deglobalization, decarbonization, and digitization to achieve this goal. Deglobalization is the trend of companies increasingly manufacturing products where they are sold rather than outsourcing production to other countries. Decarbonization refers to the general shift away from dirtier energy sources, such as coal and oil, toward cleaner ones, including natural gas and renewable energy. And digitization is the trend toward the increasing use of technology in everyday life. Management estimates that, combined, these three big-picture themes are a $100 trillion investment opportunity. Each of the company's five focus areas -- renewable power, infrastructure, real estate, private equity, and credit -- will see a benefit.
Doubling fee-generating assets in five years may seem like a big goal, but it is one that was achieved between 2020 and 2025. While there's no way to know the future, Brookfield Asset Management has proven it can live up to its promises. The expectation is that the growth path management is charting will lead to a 17% growth rate in fee-related earnings.
That is an impressive growth rate, and it makes Brookfield Asset Management a solid growth story, but that's not the only story the stock has to tell.
Brookfield Asset Management is a dividend story, too
Right now, Brookfield Asset Management has a dividend yield of 3.4%. That is well above the 1.2% yield offered by the S&P 500 index (^GSPC +0.38%) and the nearly 1.4% yield of the average finance stock. By those measures, Brookfield Asset Management is an attractive dividend option for investors seeking out higher-yielding stocks.
NYSE: BAM
Key Data Points
However, there's more to the dividend story. The 17% growth in fee-related earnings is also expected to result in material dividend growth, too. Management is projecting dividend growth of 15% a year through 2030 (which would roughly double the size of the dividend). So not only is this an income story; it is also an income growth story.
Brookfield Asset Management is fairly priced
So, growth investors, income investors, and dividend growth investors will all find Brookfield Asset Management worth considering. The last part of the story is the price, which, by comparison to large U.S. asset management peers Blackstone (BX +1.55%) and BlackRock (BLK 0.44%), seems reasonable. To start, Blackstone's dividend yield is 3.3%, while BlackRock's yield is roughly 2%. So Brookfield Asset Management's yield isn't out of line.
Meanwhile, Blackstone's price-to-earnings ratio (P/E) is 40x, and BlackRock's P/E is 27x. Brookfield Asset Management's P/E ratio is in the middle at 33x. The company's valuation using a more traditional metric doesn't appear out of line, either. While a 33x P/E ratio is hardly cheap, given the expected growth and attractive yield, Brookfield Asset Management appears to be an alluring stock today for everyone except value investors.
