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Brookfield Corporation Class A Limited Voting Shares (BN)
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Brookfield Asset Management Ltd. Class A Limited Voting Shares (BAM)
Q: I was under impression from your answers on BN and BAM that BN would outperform BAM in share price since BAM pays a dividend. Looking at both stocks the opposite is happening. BAM is outperforming BN and even more so when the div is included. Could you confirm? If my observation is correct could you explain how this is happening? Again, if i am correct and BN was your holding, would you switch to BAM? At this point i am not looking for a div so i would be fine with dripping. Is there a possibility of this trend reversing? I guess i could own both. what would be the split ratio that would reflect the relationship between BN and BAM that you would suggest?
5i Research Answer:
BAM has outperformed BN since the split, about 69% to 44% and also this year (-1% vs -7.5%). The timeframe (less than three years) is not that statistically significant. BAM plans to pay out most of its distributable cash as dividends, and thus naturally will have less cash left over for growth, vs BN with only a 0.68% dividend. BAM investors, in some times of uncertainty (like now), may simply be more interested in the dividend right now for stability. BN, meanwhile, has $140B in potential capital for deals. We would expect that, once BN starts investing money, its relative performance will improve. For a dividend investor, we think a 75/25 BAM/BN split would work, and the reverse for a growth investor.