Want Passive Income: Hold This Canadian Dividend Growth Stock Forever

Passive income seeking investors can now buy shares of dividend-paying blue-chip companies at a discount, such as Brookfield Infrastructure.

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Investing in dividend stocks is among the most cost-efficient ways to generate a steady stream of passive income. Impressively, you can start with as little as $100 and build a robust dividend portfolio over time. 

Fortunately, many TSX stocks pay dividends to shareholders. Yet, only a handful of them are solid long-term bets that are well poised to generate outsized gains. Unquestionably, investing is a game of patience. Investors should identify stocks with strong fundamentals and predictable cash flows. These cash streams allow companies to maintain and even increase dividend payouts across business cycles. 

One such Canadian dividend stock is Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP), which currently offers investors a forward yield of 4%. 

Brookfield Infrastructure Partners is recession-resistant

Brookfield Infrastructure Partners (BIP) is one of the largest owners and operators of global infrastructure networks. Impressively, its projects facilitate the movement and storage of mammoth amounts of water, passengers, data, and energy each day. Brookfield is among the few pure-play, publicly traded global infrastructure companies that own a wide portfolio of critical and premiere infrastructure assets. From these infrastructure assets, the company derives stable cash flows with high margins. 

And crucially, Brookfield’s utility business is regulated and thus earns a consistent return on its asset base. Globally, it transmits and distributes electricity and natural gas in nine countries, including Canada, the U.S., and India. 

The transport business moves freight, commodities, and passengers with large retail operations in Australia, Europe, the Americas, and the United Kingdom. It also operates toll roads in India and South America. 

Additionally, BIP has a midstream business focused in North America. The data transmission and distribution segment operates in India, France, Brazil, the U.K., and New Zealand. 

The challenge is, the S&P 500 index is down 20% from all-time highs. Yet, Brookfield Infrastructure stock has slumped by less than 10% year to date. The company is taking advantage of the discounted asset prices. This is an active year of asset rotation for the company. Notably, it has already secured four asset sales worth US$2.4 billion and five new investments worth US$2.8 billion. 

A solid dividend player

Brookfield Infrastructure increased its funds from operations from US$0.96 per share in 2012 to US$2.43 per share in 2021. Comparatively, its dividends per share have increased from US$0.36 to US$1.36 in this period.

In 2022, management expects funds from operations to rise to US$2.70 per share. Meanwhile dividends are forecast to increase to US$1.44 per share, indicating a sustainable payout ratio of less than 60%. 

Notably, a low payout ratio and widening earnings provide Brookfield Infrastructure with financial flexibility. More precisely, look to Brookfield to improve its balance sheet, increase dividends, and reinvest in capital expenditures. 

No doubt, Brookfield Infrastructure Partners has created massive wealth for long-term investors. An investment of $10,000 in BIP stock back in Q4 of 2009 would be worth $78,000 today. After adjusting for dividends, total returns would have risen to $153,000. 

In September 2009, you could have brought 1,510 shares of Brookfield Infrastructure for US$10,000. All tallied, your dividend payouts would have amounted to US$647. If you own 1,510 shares of BIP right now, annual dividends in the next year will be close to US$2,175. 

In addition to its tasty dividends, BIP stock is trading at a discount of almost 60% to consensus price target estimates. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Infra Partners LP Units. The Motley Fool has a disclosure policy.

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