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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Brookfield Infrastructure Partners in Focus
Brookfield Infrastructure Partners (BIP) is headquartered in Hamilton, and is in the Finance sector. The stock has seen a price change of -9.78% since the start of the year. The operator of utility, transportation and energy assets is paying out a dividend of $0.43 per share at the moment, with a dividend yield of 6% compared to the REIT and Equity Trust - Other industry's yield of 4.85% and the S&P 500's yield of 1.57%.
In terms of dividend growth, the company's current annualized dividend of $1.72 is up 6.2% from last year. Over the last 5 years, Brookfield Infrastructure Partners has increased its dividend 4 times on a year-over-year basis for an average annual increase of 5%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Brookfield Infrastructure's current payout ratio is 52%. This means it paid out 52% of its trailing 12-month EPS as dividend.
BIP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $3.45 per share, which represents a year-over-year growth rate of 10.58%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that BIP is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).