BN vs. BAM: Which Brookfield Is the Better Buy?

Brookfield Asset Management (TSX:BAM) and its brother look way too cheap as they look break out to new highs.

| More on:

The Brookfield brand is one of the most trusted in the entire alternative asset management scene. Undoubtedly, many of us grew to love the original Brookfield, which spun off into Brookfield Corp. (TSX:BN) and the yield-heavier Brookfield Asset Management (TSX:BAM) a while ago. Indeed, both companies are incredibly well-run, with incredible stewards running the show. While there may be a “better” buy, I do find that value investors cannot do wrong by owning either or both names as a part of a diversified portfolio.

At the end of the day, Brookfield is a heavyweight champ in the financial scene. And though BAM or BN stocks could outperform one another over an arbitrary timespan, Canadian investors should be asking themselves what they value more in stock.

For passive-income seekers, BAM would be the obvious first pick due to its generous 3.75% dividend yield at the time of writing. Of course, the asset manager may not be as “growthy” as shares of BN (Brookfield Corp); regardless, yield seekers are getting a good balance of income and long-term appreciation from the name.

Brookfield Corp.

Brookfield Corp. stands out as having a more diversified portfolio for investors who just want exposure to the firm’s wealth of assets. Of course, the stock doesn’t have nearly as high a yield—currently sitting at 0.7%—as its brother (BAM). If long-term growth is what you seek, though, I find the trade-off to be well worthwhile. The stock is up more than 21% year to date, leaving the TSX Index behind by a pretty wide margin.

Moving ahead, I expect the outperformance to continue, especially as Brookfield continues making smart deals in the alternative asset scene. And with shares of BN recently touching new all-time highs (just north of the $63 mark), I find Brookfield Corp. stock to be a timelier play. Though only time will tell if we’re at the start of a big summertime breakout, I do view the name as nothing short of intriguing at current levels.

Brookfield Asset Management

If you’re not a big income fan, perhaps it’s Brookfield Asset Management’s focus—asset management services—that has your attention. Undoubtedly, a capital-light type of play may be more your cup of tea, especially if you’re looking to play increased global interest in investing in alternative cash flow-generative assets. The nearly 4% yield is the star of the show. But with the stock rising north of 9% year to date, BAM is no slouch on the appreciation front, either.

At 33.3 times forward price to earnings (P/E), BAM looks more or less fully valued. In any case, I’d much rather go for BN stock over BAM due to its lower forward P/E, which sits at 18.0 times.

Though BN may have a slight edge over BAM at current levels, I’d not be afraid to be a net buyer of both names at today’s valuations. The Brookfield family is solid, and if you’re looking for the absolute perfect mix of income and growth, perhaps a balance of BN and BAM makes the most sense for investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Brookfield. The Motley Fool recommends Brookfield Asset Management and Brookfield Corporation. The Motley Fool has a disclosure policy.

More on Investing

bulb idea thinking
Stocks for Beginners

2 No-Brainer Stocks to Buy With Less Than $1,000

There are some stocks that are risky to even consider, but not these two! Consider these stocks if you want…

Read more »

space ship model takes off
Investing

These 2 Small-cap Stocks Offer Massive Return Potential

If you invest exclusively in blue chips and large caps, you may miss out on some fantastic growth opportunities that…

Read more »

coins jump into piggy bank
Investing

Could This Undervalued Canadian Stock Be Your Ticket to Millionaire Status?

Here's why Manulife Financial (TSX:MFC) certainly looks like an undervalued Canadian stock worth buying right now for long-term investors.

Read more »

ways to boost income
Dividend Stocks

TFSA Investors: 3 Dividend Stocks to Buy and Hold Forever

These dividend stocks are likely to consistently increase their dividends, making them attractive investment for your TFSA portfolio.

Read more »

open vault at bank
Investing

2 Defence Stocks That Canadian Investors Should Keep an Eye on in November

Canadians should keep an eye on two TSX stocks that could rise higher as global defence demand rises.

Read more »

how to save money
Dividend Stocks

Passive-Income Seekers: Invest $10,000 for $59.75 Monthly Income

Passive-income seekers can transform their money into monthly cash flow streams through dividend investing.

Read more »

happy woman throws cash
Dividend Stocks

2 Canadian Dividend Stars Set for Strong Returns

You can add these two fundamentally strong Canadian dividend stocks to your portfolio now and expect steady income and strong…

Read more »

Man in fedora smiles into camera
Dividend Stocks

Is it Better to Collect the CPP at 60, 65, or 70?

Canadian retirees can consider supporting their CPP benefit by investing in blue-chip dividend stocks with high yields.

Read more »