I am an avid income investor. I concentrate a lot of my attention on finding companies that can offer me an above-average, steadily increasing income stream. Investing in high-quality, high-yield dividend stocks is the foundation of my strategy to grow my passive income streams to the point where they will cover my recurring expenses.
Brookfield Infrastructure (NYSE: BIP)(NYSE: BIPC) is one of my favorite income stocks. I regularly expand my position in the leading global infrastructure manager. This is why I keep buying the best: high yield dividend stocks hand over fist.
A rock-solid income stream
Brookfield Infrastructure manages a globally diversified portfolio of revenue-generating infrastructure companies terribly stable cash flow. The utility, transportation, midstream and data infrastructure assets generate 90% of their revenues from predictable long-term fee-based contracts or government-regulated rate structures, with an average remaining term of ten years. Meanwhile, 70% of cash flow has no volume or price exposure, and 85% is protected or indexed for inflation.
The company aims to pay out 60% to 70% of its stable cash flow in dividends every year. That payout currently yields more than 5.5%, putting it several times above the S&P 500’s 1.3% dividend yield.
Brookfield further protects its payout with a strong balance sheet. It has a solid investment grade credit rating; mainly long-term debt with a fixed interest rate; And a lot of liquidity. The company also routinely recycles capital retain strong liquidity levels.
The global infrastructure giant combination of A stable cash flow, a healthy dividend payout ratio and a rock-solid balance sheet ensure a high-yielding dividend a very sturdy one foundation.
Lots of fuel to continue growing
Brookfield Infrastructure has increased its dividend every year since its IPO in 2009, with a compound annual growth rate of 9%. That steady upward trend should continue, with the company targeting annual dividend growth of 5% to 9% over the long term.
The infrastructure company has several growth engines supporting that plan. Brookfield estimates that inflation-indexed rates will rise, along with volume growth, as the global economy expands big The backlog of expansion projects should support 6% to 9% growth in funds from operations (FFO) per share per year.
In addition to these organic growth catalysts, Brookfield believes its capital recycling strategy will continue to push FFO growth into double digits. The company routinely sells mature assets and redeploys the proceeds to higher-yielding new investments. This year it has raised $1.2 billion through capital recycling activities. That gives it the resources to support several new investments, including the acquisition of 78,000 telecom sites in India and 40 data centers out of bankruptcy in North America. Meanwhile, the company has a full pipeline of new investment opportunities it is pursuing.
Income and growth for a bargain price
Brookfield Infrastructure offers such a high dividend yield mainly because it has a dirt-cheap valuation. The company expects to grow FFO per share by more than 10% this year from last year’s level of $2.95 per share. That outlook implies that FFO should rise to above $3.25 per share this year. Since shares recently traded for less than $30 each, Brookfield is selling for less than $30 each 10 times his FFO.
That is an extremely low rating. For perspective: the S&P 500s forward price-earnings ratio is currently around 21.5 times. With Brookfield Infrastructure growing at double digits, it is trading at around 1.5% price-growth ratio (PEG). of less than 1.0 times — a rare find.
It checks all the boxes me
Brookfield Infrastructure has become one of my top income producers over the years. That’s because of the steadily increasing payout and my decision to continually expand my position. I plan to continue buying shares of this income juggernaut in the futureespecially if the valuation remains so dirt cheap.
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Matt DiLallo holds positions at Brookfield Infrastructure Corporation and Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.
Why I Keep Buying These Top High-Yield Dividend Stocks, Hand Over Fist was originally published by The Motley Fool
