Investing in dividend growth stocks is one of the most popular ways to build long-term wealth. Companies that increase dividends each year typically expand their cash flows and earnings consistently, resulting in outsized gains over time. Investors also stand to benefit from capital gains making dividend-growth stocks an ideal bet across market cycles.
Let’s look at one such TSX dividend stock that can help you earn a steady stream of passive income each quarter.
Why I’m bullish on Brookfield Infrastructure stock
A company that owns and operates a diversified portfolio of assets, Brookfield Infrastructure Partners (TSX:BIP.UN), is valued at a market cap of $21.6 billion. These quality assets have allowed BIP to generate sustainable and growing distributions for shareholders.
Since listing on the TSX in January 2008, BIP stock has returned a stellar 1,370% to shareholders after adjusting for dividends. Currently trading 16.6% below all-time highs, BIP stock offers you a forward yield of 4.4%.
The global environment is quite sluggish, as economies continue to wrestle with inflation, supply chain disruptions, higher interest rates, and geopolitical tensions. Despite these headwinds, BIP increased funds from operations by 12% year over year to US$554 million in the first quarter (Q1) of 2023. Moreover, it secured two acquisitions while advancing multiple capital recycling initiatives in the quarter.
Backed by regulated and highly contracted cash flows, BIP has already achieved its capital deployment target for 2023. In April, it disclosed plans to acquire a European hyper-scale data platform for US$2.4 billion and made an offer to take Triton International private. Triton is the largest owner and lessor of intermodal containers globally. The deal is valued at US$13.3 billion.
BIP is also advancing capital-recycling initiatives which should result in net proceeds of US$2 billion in 2023. BIP completed the sale of two U.S.-based gas storage facilities in Q1 and sold seven businesses in the last four quarters.
What’s next for BIP stock price and investors?
Brookfield Infrastructure confirmed its current outlook for economic growth is muted, but the company remains optimistic about future growth trends. Its integrated network of transport investments that are critical to global supply chains are contracted, resulting in stable cash flows across cycles. The addition of Triton’s container network should generate additional opportunities while improving efficiencies.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Brookfield Infrastructure Partners | $47.24 | 1,922 | $0.52 | $999.44 | Quarterly |
The company’s organic growth in Q1 was strong at 9% as it benefitted from a higher pricing environment, strong volumes across transport networks, and the commissioning of new capital projects worth US$1 billion.
Due to its stable and improving cash flows, BIP has increased dividend payouts for 14 consecutive years. It now has a distribution-growth target of between 5% and 9% annually in the medium term, offering an attractive risk/reward profile to shareholders.
The next major driver of earnings growth for BIP is its partnership with Intel. Brookfield Infrastructure will invest around US$15 billion in Intel’s Arizona manufacturing facility. In return, BIP will receive 49% of the revenue and earnings generated in this facility, which should be operational in 2024.
Brookfield Infrastructure is on track to increase funds from operations by 10% year over year in 2023. So, BIP stock is priced at just 12 times forward earnings, which is very cheap for a growth stock.
BIP stock is currently trading at a discount of 28% to consensus price target estimates.
The Foolish takeaway
For investors to earn $999 in quarterly dividends, they need to purchase 1,922 shares of Brookfield Infrastructure which would be worth close to $91,000 today. Investing such a huge sum in a single stock is quite risky for the average retail investor. So, you need to identify similar dividend-growth stocks that have the potential to generate game-changing wealth and diversify your equity portfolio.
