Thursday, November 12, 2015

Brookfield Asset Management Inc. 2

Sound bite for Twitter and StockTwits is: Stock reasonable to expensive. The dividend yield has certainly been a lot lower in the past 5 years. Dividend increases have not been as good probably because the 2008 and 2009 Dividend Payout Ratios, especially re EPS got too high. They also got high in 2013. See my spreadsheet on Brookfield Asset Management Inc.

I do not own this stock of Brookfield Asset Management Inc. (TSX-BAM.A, NYSE-BAM). I bought this stock as Hees International in first in 1987. Between 1991 and when I sold in 1999 there was no dividend increases. The stock was going nowhere at that time, so I sold. There have been a lot of name changes and amalgamations since I had this stock.

This article by Southern Investigative Reporting Foundation explains the complicated set up of Brookfield and explains that Partners Limited, a private holding company controls this company via their Class B shares that can vote for one half of the Board of Directors.

For insider ownership, the CEO has shares worth around $1.2B and 2.8% of the shares. Timothy Robert Price, a 10% holder has shares worth $707.5M and around 1.6% of the outstanding shares. It is interesting that the Chairman of the Board has none according to the report I read.

There was a minor amount of insider buying when I look at insider trading. However, net insider selling was at $96.6M and 0.38% of the outstanding shares. This is a lot. For the stocks I cover the median net insider selling is at 0.02% and 70% of the companies I cover have net insider selling at 0.10% or less.

The 5 year low, median and high median Price/Earnings per Share Ratios are 9.28, 11.70 and 12.61. The corresponding 10 year ratios are 11.14, 13.00 and 15.63. The Historical P/E Median is 12.30. The current P/E Ratio is 20.25 based on a stock price of $45.81 CDN$ and 2015 EPS estimate of $2.26 CDN$. (US P/E Ratio is 20.26 based on a stock price of $34.44 and 2015 EPS estimate of $1.70 US$.) This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $38.91 CDN$. The 10 years low, median and high Price/Graham Price Ratios are 0.77, 0.89 and 1.03. The current P/GP Ratio is 1.18 based on a stock price of $45.81 CDN$. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year Price/Book Value per Share Ratio of 1.52. The current P/B Ratio is 1.54 based on a BVPS of $29.75 CDN$ and a stock price of $45.81. The current P/B Ratio is just 1.04% above the 10 year ratio. This stock price testing suggests that the stock price is reasonable and only slightly above the relative median.

The 5 year median dividend yield is 1.70%. The current dividend yield is 1.39% based on a stock price of $45.81 CDN$ and dividends of $0.64 CDN$. The current dividend is some 18% lower than the 5 year median. This testing suggests that the stock may still be relatively reasonable but way above the relative median. (You get similar results in US$ with 5 year median at 1.70%, current dividend at 1.39% on dividends of $0.48 US$ and a stock price of $34.44 US$.)

The historical median dividend yield is 3.51% CDN$ and at 2.90% US$. These yields are 60% and 52% higher than the current dividend yield of 1.39%. This stock price testing suggests that the stock price is expensive.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month stock price is $35.40 US$. This implies a total return of 4.18% with 2.79% from capital gains and 1.39% from dividends. There is a problem with the consensus stock price because the range is big with the high at $43.00 and the low at $22.23. Some analyst really like this stock, see Stock Chase.

This article in the Dakota Financial News talk about recent analysts changes for Brookfield. For example analysts at Zacks upgraded the stock from a Sell to a Hold. The Wall Street Observer gives an analysis of this stock. Jacob Donnelly of the Motley Fool suggests that this stock deserves to be in your portfolio.

This is the second of two parts. The first part was posted on Wednesday, November 11, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

This Canadian Asset Managing company invests in and operates a variety of assets on its own behalf as well as co-investors. It is focused on property, power and infrastructure assets. It operates in Canada, US and internationally. The subsidiaries of the Company are Brookfield Homes Corporation, Brookfield Properties Corporation, BPO Properties Limited, Multiplex, Brookfield Power Inc., Great Lakes Hydro Income Fund, Brascan Brasil, S.A., Brascan Residential Properties, S.A. and Brookfield Investments Corporation. Its web site is here Brookfield Asset Management Inc.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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