Brookfield Asset Management: Analyzing Growth Opportunities and Dividend Potential

Brookfield Asset Management: A Promising Growth Story

Brookfield Asset Management (BAM) is a significant player in the Canadian asset management sector, although it might not be as widely recognized as its U.S. counterparts like Blackstone and BlackRock. Brookfield's primary focus is on dramatically expanding its business. If the company's plans materialize as anticipated, there's potential for considerable future growth.

Strong Performance of Brookfield Asset Management

Over the past year, Brookfield Asset Management's stock price has increased by 29%. During the same period, the S&P 500 index rose approximately 17%. This represents a significant outperformance. Furthermore, Brookfield Asset Management surpassed its U.S. asset management peers, Blackstone and BlackRock, which saw gains of 18% and 25%, respectively.

Dividends: A Growth Indicator

The positive sentiment surrounding Brookfield Asset Management is driven by both its recent financial results and its anticipated growth trajectory. The company's dividend policy effectively encapsulates this story. The most recent dividend increase, implemented at the beginning of 2025, was a substantial 15%. Such a significant increase is only sustainable with robust business growth. The company projects its ability to maintain annual dividend increases of 15% through at least 2029.

Given this long-term objective, investors are understandably enthusiastic about this asset management firm. Typically, companies that increase their dividends are rewarded with higher stock prices, effectively keeping the dividend yield constant. Therefore, if Brookfield Asset Management aims to maintain its current yield of around 3%, the stock price must appreciate proportionally with the planned dividend increases.

Brookfield Asset Management's Valuation

It's worth noting that Blackstone's yield stands at 2.3%, while BlackRock's yield is 1.8%. This suggests that Brookfield Asset Management's stock price has room to grow beyond its dividend growth, potentially narrowing the yield gap between itself and its two larger peers. Using dividend yield as a rudimentary valuation metric, Brookfield Asset Management currently appears relatively undervalued.

What Should Brookfield Asset Management Focus On?

If you believe in the growth narrative surrounding Brookfield Asset Management, it certainly presents itself as an attractive investment opportunity. This holds true from a pure growth perspective, a dividend growth perspective, and a combined growth and income perspective. However, what key factors should investors monitor to ensure the company capitalizes on its potential?

The first crucial aspect to understand is the core asset management business model. Brookfield Asset Management earns fees for managing capital on behalf of clients. While assets under management (AUM) is a commonly used metric, Brookfield also manages a significant amount of its own capital. Therefore, the key metric to watch is fee-bearing capital, which the company reports regularly. Currently, AUM stands at approximately $1 trillion, while fee-bearing capital is roughly $560 billion.

This capital is allocated across five distinct investment sectors: renewable power, infrastructure, private equity, real estate, and credit. Anticipating growth in each of these sectors, Brookfield Asset Management projects reaching $1.2 trillion in fee-bearing capital by 2030. This implies a doubling of the business, which will underpin its ability to sustain the projected dividend growth rate.

Key Growth Drivers

The three primary drivers of growth will be a broad focus on decarbonization, deglobalization, and digitization. If you invest in Brookfield Asset Management today, closely monitor its success in converting these significant trends into a growing base of fee-bearing assets.

A Legacy of Success

Despite not being as widely known as its U.S. counterparts, Brookfield Asset Management has been investing globally for over a century, primarily in the infrastructure sector. There is little reason to doubt management's ability to achieve its stated goals, particularly given its recent strong performance.

A Word of Caution

One caveat exists. For any asset manager, market valuations are crucial for success. A bear market could significantly impact the company and potentially lead to a stock price decline. Investors might need to endure such volatility to realize the long-term benefits of owning Brookfield Asset Management. However, a bear market could also present an even more attractive buying opportunity, given the historical tendency for bull markets to follow bear markets.