If you’re investing in the stock market, whether it’s in higher-risk growth stocks, recovering value stocks, or reliable dividend stocks, you’re inevitably going to experience bad headlines. It’s impossible to avoid them, and they happen all the time.
That’s one of the biggest reasons why it’s so important to buy high-quality businesses that you’re comfortable owning for years.
After all, figuring out which companies can continue growing their earnings and cash flow over the long run is a lot easier than predicting where their share prices will be a year from now.
Because even if you’re right about the business, short-term stock prices are constantly influenced by changing valuations, investor sentiment, interest rates, geopolitical events, and a tonne of other factors that have nothing to do with how the company is actually performing.
That’s the whole point of long-term investing. The trick isn’t trying to avoid bad news, because that’s impossible. It’s learning the difference between bad headlines that actually change the long-term story and headlines that simply create short-term volatility.
Because sometimes a bad headline really does change the investment thesis, and those are the situations where investors should think twice.
But most of the time, a bad headline just creates uncertainty. Investors overreact, the stock sells off, and even though the business hasn’t really changed, you suddenly have the opportunity to buy a high-quality company at a much lower price.
That’s why bad headlines can actually create some of the best buying opportunities for long-term investors. And while any high-quality stock that you have confidence in can be worth buying on a dip, there’s no question that some of the best opportunities come from well-established dividend growth stocks.
Because if a company already generates reliable cash flow, operates in an essential industry, and has a long history of increasing its dividend, it usually takes something pretty significant to permanently change the long-term outlook.
So, when one of those stocks sells off because of a disappointing headline that doesn’t actually materially change the business, you do not only get the opportunity to buy a great company at a lower price; you’re locking in a higher yield on cost, too.
With that in mind, one of the best Canadian dividend stocks I’m consistently considering buying more of every time there’s a bad headline is Brookfield Infrastructure Partners (TSX: BIP.UN).
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One of the best dividend stocks to buy on a dip
Brookfield Infrastructure is one of the best long-term dividend growth stocks to buy on a dip because it combines defensive assets and essential operations with a long-term growth strategy.
Not only does the company own a globally diversified portfolio of infrastructure assets spanning utilities, pipelines, transportation networks, and data infrastructure, but many of those assets are either essential, have significant long-term growth potential, or both. That allows Brookfield to continue generating growing cash flow over the long haul, regardless of what’s happening in the broader economy.
Plus, many of its assets are indexed to inflation, helping Brookfield reduce risk and uncertainty even further while protecting its cash flow over time.
And when you factor in that the company has a long and successful track record of selling off its more mature assets and recycling that cash into new opportunities, it becomes clear why it’s such a reliable long-term growth stock.
It combines many of the qualities you’d expect from traditionally boring and reliable businesses, but adds a long-term growth strategy on top of that.
And if its long-term growth potential combined with its reliability wasn’t enough, the stock also currently yields a compelling 4.4%.
That’s why it’s easily one of the best dividend stocks long-term investors should look to buy whenever periods of volatility create an opportunity, and one of the top stocks I look to add to every time there’s a bad headline.
