Buying and holding dividend stocks is one of the best ways to earn passive income. Here are some stocks that I wouldn’t hesitate to buy now and more on market corrections for growing passive income.
Brookfield Infrastructure Partners
There’s nothing more reassuring than holding a stock that offers decent income today and that you expect it to continue growing your income every year. Brookfield Infrastructure Partners (TSX:BIP.UN) has been increasing its cash distribution for longer than a decade. And it just raised its cash distribution again — this time, by 5.9%, which is within its target range of 5-9% per year. This distribution growth is supported by its target funds from operations per unit growth of north of 10% per year.
At the recent quotation of $42.10 per unit, it offers a yield of almost 5.2%, which is competitive against Guaranteed Investment Certificates (GICs). What’s important to note, though, is that BIP is a riskier investment in that it doesn’t guarantee the safety of the principal like GICs do. However, it offers the potential for income growth as well as growth of your investment in the form of price appreciation. Analysts also believe the stock offers a discount of 18%, which is not bad.
Brookfield Infrastructure’s track record is stellar. Excellent management execution, leading to its growing global portfolio of diversified, quality infrastructure assets, has netted total returns of north of 15% per year for its long-term investors over the last decade.
Last year, it invested US$2 billion across three acquisitions — a global intermodal logistics operation and two geographically diverse hyperscale data centre platforms. Industry tailwinds are expected from the rollout of 5G and artificial intelligence to support growth for the data centres.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) doesn’t offer much of a yield, which is only 0.9%. However, convenience stores are super sturdy businesses that are resilient even during recessions. To be sure, in the last recession that was triggered by the pandemic, the company ploughed through with double-digit earnings growth, likely helped by people who preferred shopping with convenience and swiftness.
Importantly, Couche-Tard has been generous with sharing profits with its shareholders through a fast-growing dividend. The stock’s 15-year dividend-growth rate is 24%. Amazingly, its most recent dividend hike in November aligns with that rate at 25%.
To be sure, Couche-Tard has been a careful consolidator of convenience stores globally, including locations in North America, Europe, and Asia. After making major strategic acquisitions, it would reduce leverage in a timely manner using its strong cash flow generation.
It continues to see lots of opportunity for expansion in the United States because it only has a number two position there that represents about 5% of the convenience stores in the country compared to over 60% that are operated by single-store operators. Furthermore, it’s seeking partnerships to build platforms in Latin America and Asia, which could drive more growth.
If you had invested $10,000 in Couche-Tard stock 10 years ago, you would have six times your investment, which would have transformed to about $61,810 for total returns of almost 20% per year! Your initial dividend yield would have been puny at about 0.6% (income of $600/year), but by now, the yield on cost would be about 6.2% (income of about $6,249.6/year).
