Diverse Assets Boost Brookfield

12/30/2014 7:00 am EST


Gavin Graham

Chief Strategy Officer, INTEGRIS Pension Management Ltd

Our latest stock of the month describes itself as a "global alternative asset manager" with over $200 billion in assets under management, explains Gavin Graham in The Income Investor.

Brookfield Asset Management (BAM) focuses on property, renewable energy (principally hydro and wind), real estate, and private equity.

It uses its global platform to identify and acquire high quality real assets at favorable valuations and finance them on a long-term low risk basis.

Brookfield aims to enhance the cash flows and values of these assets through its highly regarded operating companies to earn reliable, attractive long-term total returns for its minority partners and co-investors as well as itself.

Owning the parent company gives exposure to Brookfield Renewable Energy Partners and Brookfield Infrastructure Ltd. Partnership, Brookfield Residential Properties, and its rapidly growing private equity business and asset management group.

Brookfield also is a defensive investment, falling much less than the index during bear markets (Bear beta of 0.64) while rising more in a bull market (Bull beta 1.35) presumably due to the very stable defensive nature of its income streams.

Brookfield Asset Management, which trades on the Toronto exchange (BAM-A) and the New York exchange BAM is a buy for investors with a tolerance for somewhat higher risk and longer-term horizons.

The shares pay a quarterly dividend of $0.16 per share ($0.64 a year) that count as eligible dividends for Canadian investors in non-registered accounts and are liable to the reduced 15% withholding tax rate for US citizens.

The stock is for those investors willing to accept a low initial yield in the expectation that growth in Brookfield's fee-earning assets will be reflected in increased distributions, either via dividends or spinoffs.

Brookfield offers exposure to one of the leading global managers of real assets with an exceptionally diversified portfolio, both geographically and by asset class.

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