The Dividend Stock That Turns "Someday" Into An Actual Plan

The Dividend Stock That Turns “Someday” Into An Actual Plan

Instead of planning for retirement “someday”, turn it into an actual plan starting with this dividend stock today.

Kay Ng

Author Bio Kay graduated from the University of British Columbia with a Bachelor of Science in Computer Science and furthered her studies in financial markets, finance, and financial accounting. She began investing in dividend stocks in 2008, turning an early interest into a lasting passion. Over the years, Kay has refined her investment approach to focus on high-quality businesses, using fundamental analysis and valuation to identify long-term investment opportunities. Her investment research and articles have been featured in The Motley Fool, Sure Dividend, and Seeking Alpha. Outside of investing, Kay enjoys playing the piano, from popular songs learned by ear to challenging classical compositions. Her favourites include Fantaisie-Impromptu by Frédéric Chopin and La Campanella by Franz Liszt. Education Bachelor of Science (BSc) in Computer Science, University of British Columbia Further studies in financial markets, finance, and financial accounting Areas of Expertise Dividend stocks, fundamental analysis, company valuation, quality investing, long-term investing, business fundamentals, and identifying investment opportunities in high-quality companies. Social Media Profiles LinkedIn Favorite Investment Quotes “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett

Published September 16, 4:10 pm EDT

For many Canadians, investing for retirement is one of those things that keeps getting pushed to “someday.” There’s always another bill to pay, another expense to handle, or another reason to wait. But building long-term wealth doesn’t necessarily require constant attention. Sometimes, the most important step is simply getting started with a quality dividend stock and giving it time to compound.

That’s where Brookfield Infrastructure Partners L.P. (TSX: BIP.UN) could fit into a long-term portfolio. The infrastructure partnership owns and operates a globally diversified portfolio of essential assets designed to generate relatively stable cash flow and growing distributions over time.

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A business built for long-term compounding

Brookfield Infrastructure’s strategy is straightforward: acquire high-quality infrastructure assets at attractive valuations, improve them, and eventually recycle mature assets to help fund new investments. Management targets annual funds from operations (FFO) per unit growth of more than 10% and distribution growth of 5% to 9%, while maintaining an FFO payout ratio of 60% to 70%.

Organic growth is expected to contribute 6% to 9% annually, supported by inflation indexation, economic growth, and reinvested cash flow.

This combination gives investors something important for long-term planning: a potential income stream that can grow rather than simply remain static.

The business is also diversified. About 69% of FFO comes from the Americas, 21% from Europe, and 10% from Asia Pacific. By segment, approximately 25% comes from utilities, 35% from transport infrastructure, 22% from midstream infrastructure, and 18% from data infrastructure.

This diversification can help reduce reliance on any single market or asset type.

Inflation protection and a growing pipeline

Inflation is one of the biggest threats to long-term purchasing power. Brookfield Infrastructure has built inflation protection into much of its business, with roughly 85% of FFO either protected from or indexed to inflation. About 85% is also contracted or regulated, while the weighted-average duration of contracted FFO is approximately nine years.

Meanwhile, the company has a substantial pipeline of growth projects. At the end of the second quarter, its capital backlog exceeded US$8 billion, providing a potential source of growth over the next two to three years.

Among the projects are a partnership with Intel to construct a US$30 billion semiconductor manufacturing facility in Arizona, with Brookfield Infrastructure contributing approximately US$3.9 billion. It is also developing a global data centre platform with more than 150 data centres and approximately 1.3 GW of critical load capacity, representing about US$2.7 billion of the project backlog.

Brookfield Infrastructure’s inflation protection and investments support a growing distribution, which is perfect for investors seeking a long-term income strategy.

A dividend stock for the “someday” investor

Brookfield Infrastructure currently yields roughly 5.1% and has increased its distribution for 17 consecutive years. Its five-year distribution growth rate is approximately 6%, with recent increases also around that level.

The partnership is expected to merge with Brookfield Infrastructure Corp. in the fourth quarter of this year, creating a corporation that pays dividends.

Brookfield Infrastructure isn’t a get-rich-quick investment. Its appeal is the combination of essential infrastructure, diversified cash flows, inflation protection, a sizable growth pipeline, and a history of distribution growth.

For a busy Canadian investor, regularly investing in a quality dividend stock — whether through dollar-cost averaging or buying during market pullbacks — is the first step to turn “someday” into an actual plan. Next comes identifying other dividend stocks to add to your long-term diversified portfolio.