We’ve got a couple trades this week in the Real Money Portfolio, as well as some updated thoughts on portfolio companies who reported recently, so let’s just skip the jibber-jabber about the S&P 500 hitting a new round number (closing above 5,000 for the first time) and get into the details.

Brookfield Asset Management (BAM) and Brookfield Corp (BN) reported this week, and it was mostly more of the same.

BAM was a little less aggressive with their dividend increase than I thought they might be, they raised the dividend by 19%, to 38 cents per quarter (they really talked up their expectations about rising 2024 fee income last quarter, so I though they might be able to raise the payout by as much as 30%, though “15% a year” has essentially been the promised minimum since BAM and BN split in December of 2022). They are pretty much on track with their fundraising, they continue to attract a lot of institutional capital to their infrastructure, clean energy and other funds, even with higher interest rates. BAM is essentially just a dividend growth investment that’s a rider on Brookfield’s assets under management, with a profit profile that improves over time because they’ll eventually begin to earn the carried interest on those assets that have been raised since the split… and because there’s a growing percentage of their capital that incurs management fees as soon as it is raised (instead of having to wait until they actually invest the money, as in their traditional private funds).

So yes, BAM is essentially just a pretty-predictable dividend growth story — it is not trading at as much of a discount as Brookfield Corp. (BN), but it also faces a lot less risk from the still-unspooling challenges in office real estate, with worry about urban office buildings probably causing most of that BN discount… and I think investors probably still don’t appreciate how stable and almost preordained that BAM dividend growth will be over the next several years. 15% per year means 100% growth over five years… which is likely to be more than most investments will provide, and with less uncertainty, particularly since you’re already getting a current yield of about 4%.

Which means we don’t have to over-complicate things — we buy BAM when it has an attractive yield, and we reinvest those dividends and let it compound. ...