Shares of Brookfield Asset Management (BAM 3.52%) have spent much of the past six months above $55 a share. However, the stock has dipped below that mark in recent weeks. As a result, its dividend now yields 3.3%, which is about three times higher than the S&P 500's level of 1.1%.
Here's a look at whether you should buy shares of the leading alternative investment manager at the current price or wait to see if they keep dropping.
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Lots of positives
Shares of Brookfield Asset Management have fallen from their peak even though it's having a strong year. The leading global alternative asset manager has grown its fee-related earnings by 19% over the past 12 months to $1.72 per share. The company has increased its fee-bearing assets under management (AUM) by 8% to $581 billion as more investors entrust Brookfield with their capital. Brookfield closed its second global transition flagship fund strategy in the quarter, raising a record $20 billion. It also closed its largest-ever real estate strategy fund at more than $17 billion.
In addition to these organic growth drivers, Brookfield has made several strategic investments to bolster its platform. The company and its parent, Brookfield Corporation, acquired the remaining 26% interest in Oaktree that they didn't already own, with Brookfield Asset Management funding about $1.6 billion of the $3 billion deal. Brookfield Asset Management also purchased a majority interest in Angel Oak, a leading asset manager focused on specialty mortgage and consumer credit solutions. Meanwhile, the company will become the investment manager for a significant portion of Just Group's portfolio after Brookfield Wealth Solutions bought the company.
Brookfield Asset Management also announced a strategic partnership with the U.S. Government to accelerate the deployment of nuclear energy. The government has committed to investing $80 billion in new nuclear plants across the country, utilizing technology from Westinghouse (a Brookfield portfolio company), to support growing power demand driven by AI. Additionally, Brookfield launched a $100 billion AI infrastructure program through its inaugural Brookfield AI Infrastructure fund.
Ample growth ahead
Brookfield Asset Management believes its best days are yet to come. The company firmly believes that it can grow its earnings by more than 20% annually for the foreseeable future. Several catalysts drive that view.
One notable growth driver is the growing interest among individual investors in alternative investments. Currently, individual investors allocate only about 3% of their portfolios to alternatives, compared to approximately 25% for institutional investors. This market opportunity is massive, considering that individual investors hold $40 trillion in wealth, nearly double the size of the institutional market ($22 trillion). The company has launched several funds targeting the private wealth market, including an infrastructure fund. Brookfield's strategy of expanding its offerings to this market could drive significant AUM and earnings growth in the coming years.
AI is another major growth catalyst for Brookfield. The company sees a more than $7 trillion investment opportunity for AI infrastructure, including power and transmission assets, AI factories (specialized data centers purpose-built for AI), and providing credit to AI companies. It recently launched the first of what could be many AI infrastructure funds that should help boost its AUM and fee-related earnings in the future.
Private credit is another meaningful growth driver for Brookfield. In less than a decade, the company has built its credit investment platform from the ground up through acquisitions like Oaktree, Angel Oak, and Castlelake. Today, the business generates $1.5 billion of fee-related income each year. Brookfield believes it can more than double its fee-bearing AUM from credit assets from $254 billion in 2025 to $640 billion by 2030. That should drive a meaningful increase in the earnings of its credit platform.
An enticing opportunity at the currently lower price point
Brookfield Asset Management believes it can double its business over the next five years, driven by growth catalysts like individual investors, AI, and credit. That has the company on pace to potentially double its dividend payment and value of its stock during that period, with the latter assuming it maintains its currently lower valuation multiple. This upside potential makes the stock's recent dip below $55 a share look like a great buying opportunity for long-term investors.
