Here are a couple of ‘forever’ dividend stocks for investors to build their long-term wealth. These are top TSX stocks that have outperformed their sector and the Canadian stock market in the long run: Brookfield Infrasturcture Partners L.P. (TSX:BIP.UN) and goeasy (TSX:GSY).
BIP.UN, GSY, and XIU 10-year Total Return Level data by YCharts
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Brookfield Infrastructure Partners
The top utility stock has demonstrated a sufficient history of top-notch execution since it was spun off from its parent company. Specifically, it has increased its cash distribution for about 16 consecutive years – at a high rate to boot! BIP.UN’s 15-year cash distribution growth rate is 10.3%. Although the recent rate has dropped to about 6%, it’s still above average versus the utility sector.
How is Brookfield Infrastructure able to deliver higher growth? It owns and operates a globally diversified portfolio of essential and critical infrastructure across transport, utility, midstream, and data infrastructure assets. The infrastructure play enjoys organic growth from inflation indexation, gross domestic product growth, and reinvested cash flows, which could drive funds from operations (FFO) growth of 6–9% per year.
Additionally, it has extensive experience as a value investor and operator. This means it makes smart acquisitions in quality assets at good valuations and improves acquired assets. The global infrastructure owner also doesn’t shy away from selling mature assets to redeploy the capital for better risk-adjusted returns.
Ultimately, it targets a return on investment of 12–15% per year. And it believes its strategy is able to deliver FFO per unit growth of over 10% annually for the long haul. This, in turn, drives safe cash distribution growth of 5–9% per year on a payout ratio of 60–70% of FFO.
According to YCharts data, the top utility stock’s 10-year return is approximately 14.6% per year, which is awesome, particularly when it offers nice income. At writing, Brookfield Infrastructure yields 5.1%. And analysts believe it trades at a discount of about 18% at the recent price of $43.18 per unit. Notably, it pays out a U.S. dollar cash distribution. So, Canadian investors would get an extra boost of returns by targeting to buy the stock when the loonie is strong against the greenback.
Another ‘forever’ dividend stock for your diversified portfolio
Here’s another outperformer – goeasy stock, which multiplied investors money by nine times in the last decade, delivering annualized returns of 25% per year!
The spotlight is on its amazing returns potential. However, you should know that the leading Canadian non-prime lender can experience large draw-downs when there’s high uncertainty in the economy. For example, during the 2020 pandemic year, the financial services stock lost close to 60% of its value from peak to trough. And from the peak in 2021 to the trough in 2022, it lost about 56% of its value – that was no thanks to a period of interest rate hikes. As well, in the latter case, it was also weighed by valuation compression.
Today, at about $186 per share, the dividend stock is fairly valued and should be able to deliver total returns of north of 12% per year over the next few years. Its dividend yield is about 2.5%, which is not bad for a growth stock.
When it experiences huge sell-offs due to economic weakness, goeasy stock could be a great buying opportunity in those market corrections.
