I do not own this stock of Brookfield Asset Management Inc (TSX-BAM.A, NYSE-BAM). I used to own an earlier version of this stock as Hees International, then Edper Group and then EdperBrascan back in 1987 to 1999.
When I was updating my spreadsheet, I noticed analysts do not expect this company to have a good year in 2020, but a recovery is expected in 2021. For example, analysts expect EPS to drop by 92% in 2020 to $0.14, but then for the EPS to be much better in 2021 at $1.54. Also, in 2020 there was a 3 to 2 split in shares.
The dividend yields are currently low with dividend growth currently moderate. The current dividend yield is low (below 2%) at 1.42%. The 5 and 10 year median dividend yields are low at 1.46% and 1.52%. The historical median dividend yield is moderate (2% to 4% ranges) at 2.09%. Before 2009, the dividend yields were in the moderate range. The dividend growth is moderate (8% to 14% ranges) at 8.79% per year over the past 5 years. The last dividend increase was in 2020 and it was for 12.5%. Dividends are paid in US$.
The Dividend Payout Ratios (DPR) are good. DPR for EPS for 2019 is 24.62% with 5 year coverage at 25%. However, the DPR for 2020 is expected to be 343% before falling back to 31% in 2021. The DPR for CFPS for 2019 is 9% with 5 year coverage at 10%. The DPR for Free Cash Flow for 2019 is 31% with 5 year coverage at 35%.
Debt Ratios are fine. Because this a financial, I look to see if the major debt is covered by assets. The Long Term Debt/Assets Ratio for 2019 is fine at 0.87. The Liquidity Ratio is low 1.11, but generally this is not important to financials. The Debt Ratio is fine at 1.56. The Leverage and Debt/Equity Ratio at 2.77 and 1.77 are a bit high but fine.
The Total Return per year is shown below for years of 5 to 32 to the end of 2019 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 11.27% | 15.57% | 14.09% | 1.48% |
| 2009 | 10 | 8.61% | 19.72% | 17.01% | 2.71% |
| 2004 | 15 | 7.16% | 15.09% | 12.52% | 2.57% |
| 1999 | 20 | 7.56% | 20.27% | 16.13% | 4.15% |
| 1994 | 25 | 6.00% | 19.19% | 14.82% | 4.37% |
| 1989 | 30 | 5.12% | 10.94% | 8.89% | 2.05% |
| 1987 | 32 | 5.77% | 12.33% | 9.77% | 2.57% |
The Total Return per year is shown below for years of 5 to 32 to the end of 2019 in US$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 8.79% | 12.92% | 11.58% | 1.34% |
| 2009 | 10 | 6.32% | 17.35% | 14.60% | 2.75% |
| 2004 | 15 | 6.63% | 14.90% | 12.08% | 2.82% |
| 1999 | 20 | 8.24% | 22.08% | 17.19% | 4.89% |
| 1994 | 25 | 6.33% | 19.74% | 15.18% | 4.57% |
| 1989 | 30 | 4.72% | 10.47% | 8.48% | 1.99% |
| 1987 | 32 | 5.77% | 12.46% | 9.77% | 2.69% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 14.21, 18.65 and 22.97. The corresponding 10 year ratios are 11.70, 12.90 and 14.86. The corresponding historical ratios are 11.47, 13.67 and 15.44. The current P/E Ratio is 242.01 based on a stock price of $44.52 and EPS estimate for 2020 of $0.18 ($0.14 US$). This stock price testing suggests that the stock price is relatively expensive. This test is done using CDN$.
However, analysts expect the EPS to drop some 92% in 2020. If we use the EPS estimate for 2021 of $2.02 ($1.54 US$) and a current stock price of $44.52, the P/E Ratio is 22.00. If we use the EPS estimate for 2022 of $2.37 ($1.80 US$) we get a P/E Ratio of 18.82. None of these are showing as a reasonable stock price and all are showing the stock price as relatively expensive. This test is done using CDN$.
I get a Graham Price of $10.02. The 10 year low, median, and high median Price/Graham Price Ratios are 0.77, 0.86 and 1.01. The current P/GP Ratio is 4.44 based on a stock price of $44.52. This stock price testing suggests that the stock price is relatively expensive. This test is done using CDN$.
Because the 2020 EPS estimate affects the Graham Price, I will look at the next two years also. The Graham Price for 2021 is $33.25. The P/GP Ratio would be 1.34 based on a stock price of $44.52. The Graham Price for 2022 is $35.94. The P/GP Ratio would be 1.24. None of these are showing as a reasonable stock price and all are showing the stock price as relatively expensive. This test is done using CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 1.32. The current P/B Ratio is 1.83 based on a Book Value of $27,925M, Book Value per Share of $18.47 and a stock price of $33.90. The current P/B Ratio is 39% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This test is done using US$. You will get a similar answer using CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 10.29. The current P/CF Ratio is 11.77 based on Cash Flow per Share estimate for 2020 of $2.88, Cash Flow of $4,353M and a stock price of $33.90. The current ratio is 14% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This test is done using US$. You will get a similar answer using CDN$.
A drop in CFPS is expected in 2020 of 31%. Because of this I will look at estimate for the next two years. The P/CF Ratio for 2021 is 10.69 based on a stock price of $33.90, Cash Flow per Share of $3.17 and Cash Flow of $4,792M. This P/CF Ratio is 4% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This test is done using US$. You will get a similar answer using CDN$.
The P/CF Ratio for 2022 is 8.97 based on a stock price of 33.90, Cash Flow per Share of $3.78 and Cash Flow of $5,714M. This P/CF Ratio is 13% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This test is done using US$. You will get a similar answer using CDN$.
I get an historical median dividend yield of 2.43%. The current dividend yield is 1.42% based on dividends of $0.63 and a stock price of $44.52. The current dividend yield is 42% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. This test is done using CDN$.
I get a 10 year median dividend yield of 1.57%. The current dividend yield is 1.42% based on dividends of $0.63 and a stock price of $44.52. The current dividend yield is 10% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. This test is done using CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 1.13. The current P/S Ratio is 0.93 based on Revenue estimate for 2020 of $55,221M, Revenue per Share of $36.53 and a stock price of $33.90. The current ratio is 18% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This test is done using US$. You will get a similar answer using CDN$.
Results of stock price testing suggest that the stock price might be reasonable. Both the 10 year median dividend yield test and the P/S Ratio tests show this, but the dividend yield is showing the stock price above the median with the P/S Ratio test showing the stock price below the median. There are problems with a number of tests, but the P/B Ratio test. The P/B Ratio test is good and it is showing the stock price as relatively expensive.
Is it a good company at a reasonable price? The stock price would seem to be reasonable, but it is on the high side. A lot of people like this company and it is a dividend growth company. However, I do worry about the complexity of this company.
When I look at analysts’ recommendations, I find Strong Buy, (4), Buy (6) and Hold (2). The consensus would be a Buy. The 12 month stock price is $46.98 ($35.75 US$). This implies a total return of $6.93 with 1.42% from dividends and 5.52% from capital gains.
Some analysts like this company and some do not on Stock Chase. Robin Brown on Motley Fool thinks this is a stock to buy and hold forever in your TFSA. The executive overview gives this stock 5 stars out of 5 on Simply Wall Street. American Equity Investment Life Holding Co and Brookfield team up according to a Bloomberg article. The blogger Dividend Earner has reviewed this stock and likes it.
Brookfield Asset Management Inc owns and manages commercial property, power, and infrastructure assets. Located around the world, its assets are concentrated in the United States, Canada, Brazil, and Australia. Its web site is here Brookfield Asset Management Inc.
The last stock I wrote about was about was Molson Coors Canada (TSX-TPX.B, NYSE-TAP) ... learn more. The next stock I will write about will be CCL Industries Inc (TSX-CCL.B, OTC-CCDBF) ... learn more on Wednesday, October 28, 2020 around 5 pm. Tomorrow on my other blog I will write about Magna International.... learn more on Tuesday, October 27, 2020 around 5 pm.
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.
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