The best stocks on the market are those that provide investors with a dividend as well as the opportunity to generate returns via capital gains. So, you need to identify companies that offer tasty yields while growing earnings at a robust pace, which, in turn, supports consistent dividend hikes.
One such TSX stock you can consider buying right now is Brookfield Infrastructure Partners (TSX:BIP.UN). Let’s see why.
The bull case for Brookfield Infrastructure Partners stock
One of the most diversified companies in the world, Brookfield Infrastructure Partners operates across sectors such as telecommunications, transport, and energy. Due to its robust business model, the TSX stock has returned more than 15% annually in the last 15 years.
For instance, since its initial public offering (IPO) in January 2008, Brookfield Infrastructure Partners has returned 621% to investors. After accounting for dividends, total returns are closer to 1,340%. So, an investment of $10,000 in BIP stock soon after its IPO would be worth $143,590 today.
Despite a challenging year in 2022, Brookfield Infrastructure Partners continued to generate predictable and growing cash flows. Its funds from operations rose 20% year over year to US$2.1 billion, while on a per-unit basis, fund flows were up 12% at US$2.71.
Its organic growth in 2022 stood at 10% above the company’s target of growth between 6% and 9%. The essential nature of the company’s cash-generating assets makes Brookfield Infrastructure an enviable bet for long-term investors.
BIP explained its long duration, fixed-rate debt coupled with cash flows that are indexed to inflation protects it from the impact of rising interest rates. It also secured US$2.4 billion of capital, which was deployed across five investments, while Brookfield divested five mature businesses for total proceeds of US$1 billion.
Brookfield Infrastructure Partners ended 2022 with a backlog of US$4 billion, providing investors with revenue visibility. It will continue to look to drive the top line higher through a combination of organic growth as well as acquisitions in the next 12 months.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Brookfield Infrastructure Partners | $46.33 | 718 | $0.5225 | $375 | Quarterly |
Its strong results in 2022 allowed the company’s management to approve a quarterly distribution hike of 6%, indicating an annualized payout of US$1.53 per unit, translating to a forward yield of 4.6%. Its payout ratio is quite sustainable at 64%, allowing BIP to increase dividends in the future — something it has done for 14 consecutive years.
What’s next for BIP’s stock price?
Brookfield Infrastructure Partners ended 2022 with liquidity of US$3.4 billion which will be enhanced by the proceeds from the sale of Brookfield’s toll road portfolio in India and the 50% sale of a freehold landlord port in Australia. These deals will result in net proceeds of US$260 million in the first half of 2023, and the company expects to generate US$2 billion of net proceeds from asset sales this year.
Despite its stellar results, bearish market sentiment has driven shares of the infrastructure giant lower by 18.9% from all-time highs. But the company remains a top long-term bet given its resilient business model, inflation-backed cash flows, and widening dividend payout. Analysts remain bullish on BIP stock and expect shares to surge 30% in the next 12 months.
An investment of $33,054 in BIP stock will help you earn $1,500 in annual dividends, indicating a quarterly payment of $375.
