Investing in quality dividend stocks allows Canadian investors to benefit from a steady stream of income and share price appreciation. However, in addition to the dividend yield, it’s essential to consider several other factors, such as a company’s payout ratio, free cash flow, capital expenditures, and interest expense.
Basically, a dividend-paying company should generate enough cash flow to support its payout while allowing it to reinvest in organic growth and acquisitions.
One such TSX dividend stock is Brookfield Infrastructure Partners (TSX:BIP.UN), which offers you a yield of over 5%. BIP stock went public in late 2009 and has since returned 640% to shareholders. However, if we account for dividend reinvestments, cumulative returns are closer to 1,470%.
Let’s see why I remain bullish on this blue-chip dividend stock in December 2025.
Brookfield Infrastructure is a cash-generating machine
Valued at a market cap of over $20 billion, BIP is a global infrastructure giant that owns and manages essential infrastructure across four key sectors:
- The utilities business provides electricity transmission, natural gas distribution, and home energy solutions, such as smart metres and cooling systems.
- The transport segment operates a massive network of over 39,000 km of rail and motorways for moving commodities and passengers.
- The midstream vertical handles natural gas through 25,000 km of pipelines and extensive storage and processing facilities.
- The data center segment manages critical digital infrastructure, including 306,000 telecom towers, fibre networks, and over 140 data centres worldwide.
While BIP has grown its funds from operations (FFO) by 10% annually over the last five years, management expects that number to climb above 14% moving forward. This optimism stems from a massive backlog of organic projects and the fading of several economic “headwinds.
For years, a strong U.S. dollar and rising interest rates have negatively impacted earnings. In fact, the appreciation in the USD has shaved about 2% off annual growth since 2020.
Now, these trends are shifting as interest rates are beginning to normalize, allowing the company to borrow much more cheaply. Recently, Brookfield issued new bonds at 3.7%, a significant drop from the rates they faced just two years ago.
A significant part of Brookfield’s success is its “capital recycling” program. Essentially, the company buys assets, improves them, and sells them at a profit to fund new ventures. In 2025, BIP secured US$2.8 billion by selling assets and achieved a 20% internal rate of return, demonstrating management’s value-creation capabilities.
The biggest growth engine on the horizon for BIP is artificial intelligence. As tech giants spend hundreds of billions on AI, Brookfield is stepping in to build the necessary infrastructure.
BIP is currently developing seven “AI factories” across five countries. This massive project represents six gigawatts of computing power and a long-term investment plan of US$200 billion.
A focus on dividend growth
While BIP continues to spend heavily on asset acquisitions, its dividend payout ratio has improved from 78% to 67% over the last five years. This provides it with plenty of room to increase its annual distributions to shareholders as growth accelerates.
Analysts forecast the annual dividend to increase from US$1.62 per share in 2024 to US$2.13 per share in 2029. During this period, its funds from operations are forecast to grow from US$3.12 per share to US$4.35 per share, which lowers the payout ratio to below 50%.
If the TSX dividend stock is priced at 10 times FFO, which is reasonable, it could gain over 30% over the next three years. After adjusting for dividends, total returns could be closer to 40%.
