Dividend Increase | Brookfield Asset Management $BAM #Dividend

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks BAM for another dividend increase!

There's an old Chinese proverb that says "the best time to plant a tree was 20 years ago, the next best time is now".  The reason for this is that it takes time for a tree to grow and prosper and for you to start reaping its benefits.  Dividend growth investing is much the same way.  It takes consistent saving and investing as well as time and patience to let the power of dividend growth take hold.

That's why one of my favorite things is when one of the companies I own decides to pay out more in dividends.  You mean I get a pay raise just for owning a small piece of a company?  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  

On February 10th the Board of Directors at Brookfield Asset Management (BAM) approved an increase in the quarterly dividend payment.  The dividend was increased from $0.13 to $0.14 which is a solid 7.7% increase.  Brookfield Asset Management is a  is a newly crowned Dividend Contender with 10 consecutive years of dividend growth.  Shares currently yield 0.96% based on the new annualized payout.

The new dividend will be payable March 30th to shareholders of record as of February 27th.

Since I own 50.2895 shares of Brookfield Asset Management in my Roth IRA, this raise increased my forward 12-month dividends by $2.01.  This is the 3rd raise that I've received from BAM since initiating a position in 2019.  Total organic dividend growth over that time is 31.3%.

A full screen version of this chart can be found here.

Brookfield Asset Management has paid dividends since 2004 with no cuts; however, consistent dividend growth was a struggle through 2012.  Since then annual dividend growth from BAM has been solid. 

During BAM's dividend growth streak which commenced in 2013 ,year over year dividend growth has ranged from 6.7% to 12.5% with an average of 8.9% and a median of 8.3%.

Dating back to 2004 there's been 11 rolling 5-year periods with annualized dividend growth ranging from 0.6% to 35.1% with an average of 9.7% and a median of 7.6%.

There's also been 6 rolling 10-year periods since 2004 with BAM's annualized dividend growth ranging from 4.8% to 18.2% with an average of 8.9% and a median of 6.8%.

The 1-, 3-, 5-, and 10-year rolling dividend growth rates for Brookfield Asset Management since 2004 can be found in the following chart.  

A full screen version of this chart can be found here.

For dividend yield theory I consider the fair value range to be the forward dividend yield +/- 10% compared to the 3-year moving average, the under/over value area to be to between 10%-20% deviation from the average and significant over/under value are greater than a 20% deviation from the average.

A full screen version of this chart can be found here.

Brookfield Asset Management's 3-year average forward dividend yield is 1.22% which corresponds to a share price of $46 based on the new annualized payout.  

I consider the fair value range based on dividend yield theory to be the 3-year moving average yield +/- 10%.  That gives a fair value range of $52 - $51 and suggests that shares are trading above the upper end of the fair value range.

Another quick and dirty valuation method is the Gordon Growth or Dividend Discount model.  This valuation method is based solely off the expected future dividends as well as your required return.  Based on a 10% discount rate and assuming BAM can maintain 8.5% annual dividend growth shares are worth around $41 per share.

A full screen version of this chart can be found here.

However, reducing the estimated growth rate to 7.5% and maintaining the 10% discount rate lowers the fair value to $24.  With a 9% growth rate and 10% discount rate the fair value becomes $61.

Wrap Up

This raise increased my forward dividends by $2.01 with zero effort on my part.  That's right, absolutely nothing to contribute to their operations.  Based on my Roth IRA's current yield of 2.14% this raise is like I invested an extra $94 in capital.  Except that I didn't!  One of the companies I own just decided to send more cash my way. 

That's how you can eventually reach the crossover point where your dividends received exceed your expenses.  That's DIVIDEND GROWTH INVESTING AT WORK!  The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

This is the 6th dividend increase I've received from the companies in my Roth IRA increasing my forward 12-month dividends by $36.99 combined.

My FI Portfolio's forward-12 month dividends are $9,714.28  Including my FolioFirst portfolio's forward dividends of $179.35 brings my total taxable accounts dividends to $9,893.63.  My Roth IRA's forward 12-month dividends are $934.06.  My Rollover IRA's forward dividends are $4,047.68.  Across all accounts I can expect to receive $14,875.37 in dividends over the next year.

I've also started compiling dividend data on many of the companies that I own or would like to own.  Brookfield Asset Management's can be found here which includes the dividend history (as far back as I can find without spending hours hunting it down), rolling dividend growth rates and dividend yield theory.  To see other companies that I've already gathered the data on you can check out the Dividend Companies page.  Check it out and let me know what you think.

Do you own shares of Brookfield Asset Management? 
Please share your thoughts below.