A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the past 10 years Brookfield Asset Management Inc (TSX:BAM.A) has returned an average of 2.00% per year to investors in the form of dividend payouts. Does Brookfield Asset Management tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Brookfield Asset Management
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Brookfield Asset Management pass our checks?The current trailing twelve-month payout ratio for the stock is 40.77%, which means that the dividend is covered by earnings. However, going forward, analysts expect BAM.A’s payout to fall to 33.42% of its earnings, which leads to a dividend yield of around 1.58%. Moreover, EPS is also forecasted to fall to $0.99 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time. Relative to peers, Brookfield Asset Management produces a yield of 1.50%, which is on the low-side for Capital Markets stocks.
Whilst there are few things you may like about Brookfield Asset Management from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three pertinent aspects you should look at:
- Valuation: What is BAM.A worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BAM.A is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Brookfield Asset Management’s board and the CEO’s back ground.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.