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Is Brookfield Asset Management Stock a Millionaire-Maker?

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Brookfield Asset Management (NYSE: BAM) is an interesting dividend stock that many individual investors may not be familiar with. It has generated total returns of 64% since its creation in late 2022, as a spin-off from Brookfield Corporation, one of the world’s largest alternative investment companies.

Alternative investments, which are assets beyond stocks, bonds, or cash, can be lucrative but are often riskier and more complex. Individual investors may lack the connections or capital to access them.

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It can be confusing to decipher how a company like Brookfield Asset Management makes money, and, more importantly, whether the stock’s market-beating returns can make you a millionaire over the long term. A deep dive into the business revealed some promising answers.

You could call Brookfield Corporation Canada’s version of Berkshire Hathaway. However, instead of holding full ownership of its various subsidiaries, as Berkshire Hathaway does, it spun them off as public companies and helps manage them as stakeholders.

Brookfield manages over $1 trillion in alternative assets spanning the globe, with a focus on:

These are often physical assets, like renewable energy projects, homes, buildings, or entire businesses.

Brookfield Asset Management creates and sells private investment funds and other products and services to raise capital from clients, then invests it on their behalf in alternative assets across the Brookfield ecosystem and elsewhere. It works similarly to a hedge fund, except that it invests in buildings, infrastructure, and private businesses instead of traditional assets like stocks.

The company manages these investments in exchange for fees.

Unlike the other Brookfield subsidiaries, Brookfield Asset Management does not directly own or operate physical assets.

It’s an asset-light and highly profitable business model. Brookfield Asset Management has numerous non-cash items that affect its earnings. Therefore, it reports the cash profits it can distribute to shareholders as distributable earnings. Brookfield Asset Management generated $4 billion in revenue last year and $2.36 billion in distributable earnings. In other words, the business turns 59% of its revenue into cash. That’s tremendous, and higher than the rate of most companies.

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