There's A Lot To Like About Brookfield Asset Management's (TSE:BAM.A) Upcoming US$0.14 Dividend

By
Simply Wall St
Published
February 22, 2022
TSX:BAM.A
Source: Shutterstock

It looks like Brookfield Asset Management Inc. (TSE:BAM.A) is about to go ex-dividend in the next two days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Brookfield Asset Management's shares on or after the 25th of February will not receive the dividend, which will be paid on the 31st of March.

The company's upcoming dividend is US$0.14 a share, following on from the last 12 months, when the company distributed a total of US$0.56 per share to shareholders. Calculating the last year's worth of payments shows that Brookfield Asset Management has a trailing yield of 1.1% on the current share price of CA$67.91. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Brookfield Asset Management

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Brookfield Asset Management is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
TSX:BAM.A Historic Dividend February 22nd 2022

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Brookfield Asset Management's earnings per share have been growing at 18% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Brookfield Asset Management has delivered an average of 9.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy Brookfield Asset Management for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Brookfield Asset Management more closely.

So while Brookfield Asset Management looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For instance, we've identified 3 warning signs for Brookfield Asset Management (1 makes us a bit uncomfortable) you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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