Is Brookfield Asset Management Stock a Buy Now?

Brookfield Asset Management (NYSE: BAM), one of the top alternative asset management firms in the world, went public in 1983. But in December 2022, it rebranded itself as Brookfield Corp. (NYSE: BN) and spun off its core asset management business as the "new" Brookfield Asset Management.

Brookfield Corp. now serves as the parent company of Brookfield Asset Management, which it holds alongside its other investments. The new Brookfield Asset Management became a pure asset manager, which earns management fees through its investment funds.

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Brookfield Asset Management's stock has risen in price nearly 50% since its spinoff listing in 2022. Should investors still buy it as a safe-haven play in this turbulent market?

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How do you gauge Brookfield Asset Management's growth?

Instead of investing in traditional assets like stocks, bonds, and Treasury bills, Brookfield Asset Management gives its investors exposure to "alternative" assets in the real estate, infrastructure, private equity, and credit markets.

As an asset management firm, Brookfield gauges its growth with three key performance metrics: its fee-bearing capital (FBC), or its total managed capital from its clients; its fee-related earnings (FRE), or its total earnings from its management and advisory fees; and its distributable earnings (DE), or its available cash flow for covering its dividends and interest payments. All three of those metrics grew at healthy rates over the past three years.

Data source: Brookfield Asset Management. YOY = Year over year.

Brookfield's robust growth was mainly driven by institutional investors, many of whom rotated from traditional assets toward alternative ones as rising interest rates, inflation, geopolitical conflicts, and other macro headwinds rattled the stock and bond markets. Many of Brookfield's funds also lock in their investors for more than 10 years, so it's well insulated from the near-term headwinds.

Brookfield is also a cloud and AI play

Brookfield's high exposure to the infrastructure and renewable energy markets puts it in a strong position to profit from the growth of the cloud and artificial intelligence (AI) markets. As cloud companies expand their data centers to accommodate the latest AI applications, their soaring energy needs should generate strong tailwinds for many of Brookfield's infrastructure and energy investments.

It's been increasing its exposure to the AI market. Earlier this year, it announced a 20 billion euro ($22.4 billion) investment over the next five years to expand France's AI infrastructure. It also expanded its U.S. onshore renewables business to meet the AI market's insatiable appetite for more electricity.

It can easily cover its dividends

Brookfield Asset Management generated $1.28 in DE per share in 2022, and that figure rose to $1.37 in 2023 and $1.45 in 2024. Those earnings easily covered its annual per-share dividends of $0.56 in 2022 and $1.28 in 2023 -- but they didn't quite cover its $1.52 in dividends per share in 2024.

That slightly higher payment isn't too troubling, since Brookfield's other growth metrics are still healthy. In fact, Brookfield actually raised its annual dividend rate to $1.75 this February -- which will still eclipse its projected DE per share of $1.65 for 2025.

Is it the right time to buy Brookfield Asset Management?

At $59 a share, Brookfield doesn't look cheap at 36 times this year's DE per share. Its forward dividend yield of 3% probably won't dazzle any income investors when the 10-year Treasury still pays a 4.5% yield. That high valuation and average yield could limit its upside potential.

Brookfield still looks like a sound long-term investment, but it probably won't head much higher over the next few quarters. Investors can nibble on it now, but they probably shouldn't accumulate more shares before its valuations cool off to more sustainable levels.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Brookfield, Brookfield Asset Management, and Brookfield Corporation. The Motley Fool has a disclosure policy.