Brookfield Asset Management (NYSE: BAM) has seen its stock surge over 40% in the past year. The company, one of the largest alternative investment firms globally, manages over $1 trillion in assets. Brookfield Asset Management was created by a spinoff a few years ago.
Despite its relatively new stock, the company’s business model and growth prospects are attracting attention from investors. As part of the Brookfield ecosystem, the company raises funds and invests on behalf of clients in various alternative assets. These include real estate, energy, infrastructure, private equity, and credit.
Brookfield Asset Management does not operate the assets it invests in. Instead, it manages the equity, making its business model highly profitable and asset-light. The company is poised to become a strong dividend stock.
It already offers a yield of nearly 3.2%.
Brookfield’s asset-light business model
Brookfield’s fee-based revenue model allows it to pay out most of its earnings as dividends.
As Brookfield expands its assets under management by attracting new clients and capital, it plans to increase its fee-based revenue. Management projects this revenue will grow enough to raise the dividend at a 15% annualized rate through 2029. The global opportunity for alternative investments is vast.
Management believes the market, currently valued at around $25 trillion, will expand to over $60 trillion by 2032. With $1 trillion under management, Brookfield is well-positioned to capture a significant share of this fragmented industry. Despite a seemingly high price-to-earnings (P/E) ratio of 40, Brookfield Asset Management’s high growth prospects and profitable, asset-light business model justify this valuation.
The company anticipates mid-teens profit growth over the next four to five years. Investors should consider adding Brookfield Asset Management to their portfolios, especially at prices below $60. The company’s combination of robust growth outlook, lucrative fee-based model, and potential as a dividend growth stock makes it an attractive option for long-term investment.
