When it comes to safety, very few companies can beat the operators of critical infrastructure, such as roads and rail networks.
The reason is that during a recession or a slowing growth environment, governments often turn their focus on infrastructure by investing heavily to create jobs and win voters.
In Canada, I like Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP) and Canadian National Railway Company (TSX:CNR)(NYSE:CNI) stocks for their huge growth potential and their excellent track records of consistently producing higher returns for their investors.
Let’s find out more about these companies.
Brookfield Infrastructure Partners
This partnership owns a strong and diversified portfolio of assets, including utilities, transportation, energy, and communications infrastructure across North and South America, Asia Pacific, and Europe.
Its portfolio of critical infrastructure assets globally provides stability and a strong defence against any economic downturn. Its assets, for example, include electricity and gas distribution businesses in Australia and the U.S., railroads in South America, and a portfolio of 36 ports in North America, Asia Pacific, the U.K., and across Europe.
As global customers use these critical assets, Brookfield gets paid a utilization fee, which generates stable cash flow. Due to this unique growth feature, investors love Brookfield stock. Since 2009, the company’s stock has soared more than three times and is currently trading at $54 a share.
And when it comes to rewarding its investors, Brookfield Infrastructure is ahead of the pack.
With a current dividend yield of 3.2%, Brookfield pays a quarterly payout of $0.435 a share. The company targets annual growth of 5-9% in its dividend, but the actual growth in dividend has been about 12%.
Canadian National Railway Company
CNR plays a major role in moving traffic across North America. It’s the only railway in North America that touches three coasts, allowing shipments to reach 75% of the population.
The company moves over $250 billion worth of goods every year. Chances are, most of your necessities, car parts, mobile devices, food, soaps etc., have been handled by CNR.
CNR stock is also one of the best dividend-growth stocks among Canadian companies, paying $0.4125 quarterly dividend. This payout is 10% higher when compared to the same period last year. Over the past five years, CNR’s annual dividend distribution has doubled to $1.5 a share on top of 350% capital gains.
CNR has been able to produce this stellar performance because it faces a very little competition and it commands pricing power. The Canadian rail industry is dominated by only two companies — CNR and Canadian Pacific Railway Limited.
The bottom line
Keeping some quality defensive growth stocks in your portfolio is good to provide safety when other holdings are exposed to various market risks. Over the long run, these two companies are likely to outperform due to a critical nature of their services and certainty in their revenues.
