Staff Reporter

Investors might want to take a closer look at Brookfield Asset Management (BAM), a potential standout in the world of dividend growth stocks.

Brookfield Asset Management is a noteworthy dividend stock that many individual investors may not yet know. Since its formation in late 2022, following a spin-off from Brookfield Corporation—one of the largest alternative investment firms globally—it has yielded total returns of 64%.

Alternative investments extend beyond traditional stocks, bonds, and cash. While they can be lucrative, they often come with higher risks and complexities that individual investors may find hard to navigate.

Understanding how Brookfield Asset Management generates profits—and whether its impressive market returns can lead to millionaire status over time—requires some investigation. Our exploration of the company offers some promising insights.

Brookfield Asset Management’s Role in the Brookfield Empire

Think of Brookfield Corporation as Canada’s answer to Berkshire Hathaway. Unlike Berkshire, which fully owns its subsidiaries, Brookfield spins them off into public companies while managing them as stakeholders.

Brookfield oversees more than $1 trillion in alternative assets worldwide, focusing on:

• Renewable energy and power transition
• Infrastructure
• Private equity
• Real estate
• Credit

These investments often involve tangible assets, such as renewable energy projects, residential properties, commercial buildings, and private businesses.

Brookfield Asset Management creates and sells private investment funds and various products to attract capital from clients, which it then invests in alternative assets across the Brookfield network and beyond. This approach is similar to hedge funds, although it specializes in physical assets rather than traditional stocks.

The firm manages these investments for a fee.

The Making of a Dividend Growth Superstar

Brookfield Asset Management operates differently than the other Brookfield subsidiaries; it doesn’t directly own or operate physical assets. Instead, it employs an asset-light and highly profitable business model.

Many of its earnings are influenced by non-cash items, so it reports cash profits available for distribution to shareholders as distributable earnings. Last year, it generated $4 billion in revenue with $2.36 billion in distributable earnings, translating to an impressive 59% conversion rate.

The company aims to distribute 95% of its distributable earnings to shareholders—a figure that most companies cannot sustain. Brookfield’s model requires minimal reinvestment, allowing it to grow as it raises more capital from investors.

This capacity to generate substantial cash while continuing to expand positions Brookfield Asset Management as a leading candidate for dividend stock success.

So, Is the Stock a Millionaire-Maker?

Yes, it has the potential to be a millionaire-maker, but it may not suit every investor.

With a market cap of $80 billion, Brookfield Asset Management likely won’t turn a single $1,000 investment into a fortune overnight. There are inherent risks; the company’s growth hinges on its ability to raise new capital. Economic downturns or underperforming investment products could pose challenges.

However, there remains considerable long-term investment potential. The market for alternative assets is currently valued at $25 trillion and could expand to $60 trillion by 2032.

As long as Brookfield Asset Management continues to attract new capital, there’s no telling how much it can grow its assets under management (AUM) and, subsequently, its fee revenue.

Management is optimistic, projecting an annualized growth rate of 18% for distributable earnings and a 15% increase in dividends through 2029.

If these targets are met, the stock’s dividend could double by then, currently yielding 3.6%. This offers a compelling blend of income and growth, which could lead to significant total returns when dividends are reinvested.

For investors willing to make a substantial initial investment or those who can buy, hold, and reinvest dividends over time, Brookfield Asset Management could indeed be a millionaire-maker. Regardless of individual outcomes, it clearly possesses the traits of an excellent dividend stock.

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