Should You Buy Brookfield Asset Management While It's Below $55?

A good stock is an even better buy when a pullback has lowered its price. A discounted price resulting from a dip, however, doesn't necessarily make a stock worth buying.

That's the conundrum anybody eyeing a stake in Brookfield Asset Management (NYSE: BAM) right now is facing. The stock's slow and steady 15% slide from its August peak has pumped its fast-growing dividend's yield up to an attractive 3.4%. But the sell-off might not have run its full course yet. Broad market weakness could continue dragging BAM lower. What's an interested investor supposed to do?

Buy it anyway, while you can do so at any price near $50 (it recently traded at about $52). It's worth buying even if there's still more downside in store.

What's Brookfield Asset Management?

If the name rings a bell, there's a reason. Several publicly traded outfits that are part of the Brookfield family bear the same name, like Brookfield Infrastructure Partners, Brookfield Renewable Partners, Brookfield Business Partners, and a handful of other operating entities. Most of these outfits are limited partnerships serving as pass-through entities paired with a counterpart corporation. All of them pay comparable dividends, however. Just bear in mind that direct owners of the partnerships must deal with slightly more complicated tax rules.

None of that really matters to Brookfield Asset Management shareholders though. The company simply manages all the Brookfield entities for a recurring fee, of course. Organized as an ordinary corporation and effectively acting as a mutual fund or exchange-traded fund (ETF) manager, most of its fee-based earnings are passed along to investors in the form of dividends, or distributions.

And business is good. Brookfield Asset Management has not only paid a dividend every quarter since it was spun out of what's now called Brookfield Corporation in late 2022, but has raised its quarterly payout from $0.32 per share then to just under $0.44 per share now. That's an annualized growth rate of nearly 11%.

This is still just the beginning though, and it arguably understates what awaits.

Why you want to own a stake in Brookfield

Brookfield Asset Management is a well-run outfit to be sure. You would be plugging into a piece of an admittedly complicated company with decades of success within the investment management business.

Its pedigree isn't the big reason income-minded investors might want to take on a stake in Brookfield Asset Management though. Neither is its forward-looking dividend yield of 3.4%, as solid as that number may be.

Rather, the chief reason to own a piece of the company here and now is the nature of the underlying businesses it manages, and how well positioned they are for continued growth.

Take the aforementioned Brookfield Infrastructure Partners as an example. It's "one of the largest owners and operators of critical global infrastructure networks which facilitate the movement and storage of energy, water, freight, passengers and data." This includes stakes in artificial intelligence data centers... 140 of them, in fact. Brookfield Infrastructure Partners also holds stakes in utility companies serving this fast-growing market, leveraging more than 3,000 kilometers of power transmission lines. These are business that are not only never going away, but industries that are only going to become more lucrative as capacity to deliver on all of these fronts becomes even more strained.

Image source: Getty Images.

Ditto for Brookfield Renewable Partners, which -- just as the name suggests -- is capitalizing on the shift away from fossil fuels and toward cleaner alternatives, like wind, solar, and hydro, as well as storage. For perspective on the opportunity, BRP recently inked a 20-year deal with Alphabet's Google to sell it as much as 3,000 megawatts' worth of electricity from its hydroelectric power production facilities in Pennsylvania.

This agreement between Alphabet and Brookfield underscores another noteworthy nuance here. That is, holding a stake in this outfit offers you exposure to specific, hand-crafted opportunities that aren't accessible any other way. In other words, Brookfield Asset Management has a private equity component to it in an environment where many publicly traded stocks have become too volatile or too overvalued to comfortably own.

Perhaps more important for investors is simply that Brookfield has made a point of establishing itself in businesses that are increasingly critical. That's why the company is comfortable touting that it's targeting growth of between 15% and 20% for the foreseeable future, with dividend growth likely to be in the same ballpark. You would be hard-pressed to find a stronger pace of improvement that can be sustained for the long haul.

Perspective

Is Brookfield Asset Management the highest-yielding or least volatile dividend payer you can buy right now at a comparable valuation? No. But it's certainly an attractive all-around package that would be tough to beat. It offers strong dividend growth now and for the foreseeable future. Plus, it's consistent. The yield's solid, too, for a stock of this caliber and risk. That's why Brookfield Asset Management is a buy while it's under $55, although really, any price below analysts' average target of $62.46 would be a fair price to pay.

Just don't lose sight of what Brookfield Asset Management is, and what you can reasonably expect from it. Its underlying businesses mean it's almost as much of a growth stock as it is a dividend payer. But it isn't immune to sweeping market weakness. So, don't be shocked if the current sell-off persists for a while longer.

Just don't panic if it happens either. It wouldn't be anything particularly unusual for this sort of stock.

James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Brookfield, Brookfield Asset Management, Brookfield Corporation, and Brookfield Wealth Solutions. The Motley Fool recommends Brookfield Infrastructure Partners, Brookfield Renewable, and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.