Market volatility can test even the most disciplined investors. When share prices swing sharply, it is tempting to sell and wait for calmer conditions. But for long-term investors, volatility can also create opportunities to buy high-quality businesses at more attractive valuations.
That’s why I prefer dividend stocks with durable businesses, recurring cash flow, and management teams capable of compounding earnings through different market cycles. One stock I would be comfortable holding through periods of turbulence is Brookfield Asset Management (TSX:BAM).
Source: Getty Images
A business built for the long term
Brookfield Asset Management is a leading global alternative asset manager with exposure to infrastructure, renewable power and transition, private equity, real estate, and credit. Its scale and diversification are important advantages. The company operates and deploys capital across more than 50 countries and benefits from a large base of institutional and other long-term investors.
More importantly, BAM’s business model is designed around recurring, fee-based revenue. The company earns management fees on capital that it manages for clients, giving it a relatively predictable earnings stream compared with businesses that depend heavily on selling products or generating profits from a single economic cycle.
BAM also has significant opportunities to deploy capital as market conditions change. Its investment strategies are tied to powerful long-term themes, including rising demand for infrastructure, energy, digitalization, and private credit.
This combination of recurring revenue, diversification, and secular growth gives BAM an attractive foundation for compounding over many years.
Strong earnings support the dividend
Investors do not have to rely solely on BAM’s growth story. The company is already producing strong financial results.
In the last 12 months ending in the second quarter, fee revenues increased about 16% year over year to US$5.8 billion, while fee-related earnings climbed 19% to US$3.2 billion. Distributable earnings increased 12% to US$2.8 billion.
These results demonstrate why recurring fees can be particularly valuable during uncertain markets. BAM can continue generating substantial earnings even when asset prices and investor sentiment fluctuate.
Its dividend provides another reason to stay invested. In February, BAM raised its quarterly dividend by nearly 15%, bringing the annualized payout to US$2.01 per share. The company has continued growing its dividend since it was spun off from its parent company in late 2022, and its earnings growth provides the foundation for future increases.
For income-oriented investors, this combination of a roughly 4% yield and potential for double-digit dividend growth is extremely appealing.
Why I’d hold BAM through volatility
No stock is immune to market declines, and BAM can certainly experience periods when its valuation contracts. Alternative asset managers can also face fundraising challenges, changes in interest rates, and weaker investment markets.
However, these risks are precisely why I would focus on the business rather than the daily share-price movement. BAM’s diversified platform, recurring fee revenues, and exposure to long-term investment trends give it multiple avenues for continued growth.
The bottom line
For investors seeking a dividend stock to hold through market volatility, Brookfield Asset Management is a good consideration. Its recurring fee-based earnings, diversified investment platform, growing dividend, and long runway for capital growth make short-term market swings less concerning.
BAM stock has been experiencing a dip this week, making it a great time for interested investors to do their due diligence to see if it may be a good fit for their diversified portfolio.
When volatility creates a sufficiently attractive entry point, this is one dividend stock I would be happy to keep buying — and hold for the long haul.
Market volatility can test even the most disciplined investors. When share prices swing sharply, it is tempting to sell and wait for calmer conditions. But for long-term investors, volatility can also create opportunities to buy high-quality businesses at more attractive valuations.
That’s why I prefer dividend stocks with durable businesses, recurring cash flow, and management teams capable of compounding earnings through different market cycles. One stock I would be comfortable holding through periods of turbulence is Brookfield Asset Management (TSX:BAM).
Source: Getty Images
A business built for the long term
Brookfield Asset Management is a leading global alternative asset manager with exposure to infrastructure, renewable power and transition, private equity, real estate, and credit. Its scale and diversification are important advantages. The company operates and deploys capital across more than 50 countries and benefits from a large base of institutional and other long-term investors.
More importantly, BAM’s business model is designed around recurring, fee-based revenue. The company earns management fees on capital that it manages for clients, giving it a relatively predictable earnings stream compared with businesses that depend heavily on selling products or generating profits from a single economic cycle.
BAM also has significant opportunities to deploy capital as market conditions change. Its investment strategies are tied to powerful long-term themes, including rising demand for infrastructure, energy, digitalization, and private credit.
This combination of recurring revenue, diversification, and secular growth gives BAM an attractive foundation for compounding over many years.
Strong earnings support the dividend
Investors do not have to rely solely on BAM’s growth story. The company is already producing strong financial results.
In the last 12 months ending in the second quarter, fee revenues increased about 16% year over year to US$5.8 billion, while fee-related earnings climbed 19% to US$3.2 billion. Distributable earnings increased 12% to US$2.8 billion.
These results demonstrate why recurring fees can be particularly valuable during uncertain markets. BAM can continue generating substantial earnings even when asset prices and investor sentiment fluctuate.
Its dividend provides another reason to stay invested. In February, BAM raised its quarterly dividend by nearly 15%, bringing the annualized payout to US$2.01 per share. The company has continued growing its dividend since it was spun off from its parent company in late 2022, and its earnings growth provides the foundation for future increases.
For income-oriented investors, this combination of a roughly 4% yield and potential for double-digit dividend growth is extremely appealing.
Why I’d hold BAM through volatility
No stock is immune to market declines, and BAM can certainly experience periods when its valuation contracts. Alternative asset managers can also face fundraising challenges, changes in interest rates, and weaker investment markets.
However, these risks are precisely why I would focus on the business rather than the daily share-price movement. BAM’s diversified platform, recurring fee revenues, and exposure to long-term investment trends give it multiple avenues for continued growth.
The bottom line
For investors seeking a dividend stock to hold through market volatility, Brookfield Asset Management is a good consideration. Its recurring fee-based earnings, diversified investment platform, growing dividend, and long runway for capital growth make short-term market swings less concerning.
BAM stock has been experiencing a dip this week, making it a great time for interested investors to do their due diligence to see if it may be a good fit for their diversified portfolio.
When volatility creates a sufficiently attractive entry point, this is one dividend stock I would be happy to keep buying — and hold for the long haul.
