Businesses take time to grow. Here are two TSX stocks that could help set you up for life if you park long-term capital in them and allow them to grow over time. Other than having a growth nature in their businesses, they also pay nice dividends that are likely to grow at an above-average pace in the long run. Furthermore, it’s important for investors to be ready and comfortable to potentially add to their positions on meaningful market sell-offs.
Brookfield Asset Management
Brookfield Asset Management (TSX:BAM) is a large global alternative asset manager with fee-bearing capital of US$459 billion. It manages assets, which are double that size at US$925 billion, across renewable power and transition (11% of fee-bearing capital), infrastructure (20%), private equity (9%), real estate (20%), and credit (39%) in more than 30 countries. These are quality, essential assets and businesses that form the backbone of the economy.
As an owner of these assets, other than earning management and performance fees, it also generates cash flows from the underlying assets. The nature of its alternative assets incorporates diversification with less volatility, predictable cash flows, and excess returns that allow it to attract a growing base of institutional clients. More specifically, the company aims to generate attractive, long-term risk-adjusted returns of 12 to 20% on its investments.
In its recent presentation, Brookfield noted that it has been seeing investors “consolidating their exposure to the asset management sector to the largest and most diversified managers,” from which the company will benefit as a leader in the space. It is positioned to ride on the global secular tailwinds of decarbonization, deglobalization, and digitalization requiring trillions of dollars of investments around the world over decades.
Brookfield Asset Management was spun off from its parent company at the end of 2022. The growth stock has performed well, delivering annualized returns of approximately 26% since January 2023. It also pays a good dividend that offers a yield of about 3.9%. BAM’s last dividend hike was 18.8% in February.
goeasy
goeasy (TSX:GSY) is a leading non-prime lender in Canada with over three decades of industry experience. It has served more than 1.3 million Canadians across its family of brands, including easyhome that provides lease-to-own financing for home entertainment products, computers, appliances, and household furniture), easyfinancial that provides personal and home equity loans, and LendCare that offers financing for powersports, automotive, retail, and healthcare.
goeasy uses risk-based pricing to motivate its customers to lower their interest rates and reduce their borrowing costs. From 2019 to 2023, the company grew its loan book at a compound annual growth rate (CAGR) of 35%, while improving credit performance by reducing its net charge-offs from 13.3% to 8.9%. (Currently, the company targets a net charge-off rate of 8.5% to 9.5%.). A combination of loan book growth and stable credit performance has driven free cash flow growing at a CAGR of 33% in the period. The company just achieved another milestone by surpassing a $4 billion consumer loan portfolio.
The dividend stock yields about 2.5%, while its 5- and 10-year dividend growth rates are about 34% and 27%, respectively. GSY stock’s last dividend hike in February was 21.9%.
