After a brief rebound, the Nasdaq Composite(NASDAQINDEX: ^IXIC) has dipped back into correction territory on new tariffs and trade tension fears. Investors looking to filter out the noise may want to consider stocks and exchange-traded funds (ETFs) that pay dividends.
Dividends can be a simple and effective way to collect passive income without worrying about what stock prices are doing. Here's why these three Motley Fool contributors think Brookfield Infrastructure(NYSE: BIP)(NYSE: BIPC), Target (NYSE: TGT), and the Global X MLP ETF(NYSEMKT: MLPA) stand out as top buys now for dividend investors.
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Build a stronger passive income stream with Brookfield Infrastructure
Scott Levine(Brookfield Infrastructure): Tumbling more than 8% since the start of 2025, Brookfield Infrastructure stock hasn't given investors a lot to celebrate so far this year. But for dividend-hungry investors, this should suit them just fine because it presents a great opportunity to pick up this infrastructure stock -- along with its 5.7% forward yield -- at a discount to its historical valuation.
While potential investors may find the dip in Brookfield Infrastructure's stock disconcerting, it's important to appreciate the nature of the company's business: operating utilities and energy, transportation, and data assets.
Through the operation of these assets, which are located in the Americas, Europe, and the Asia-Pacific region, Brookfield Infrastructure generates steady and growing cash flows. From 2009 through 2024, for example, Brookfield has increased its funds from operations at a 14% compound annual growth rate (CAGR).
With these consistently growing cash flows, moreover, management can plan accordingly for capital expenditures such as distributions to investors and acquisitions, with the latter providing added cash flow growth. According to management, the three acquisitions that it closed on last year will provide $150 million in funds from operations annually. And with about $8 billion of projects in its backlog, there are plenty of growth opportunities remaining.
The company's distribution has had a 9% CAGR from 2009 through 2024, showing management's consistent interest in returning capital to shareholders. It's now an opportune time to click the buy button. Brookfield Infrastructure stock is now trading at 2.8 times operating cash flow, a discount to its five-year cash flow multiple of 4.1.
Target has a high yield and decades of dividend increases
Daniel Foelber (Target): Target stock is hovering around a five-year low, completely giving up gains made during the pandemic when sales and earnings soared and the stock hit an all-time high over $260 per share.
Target has proved vulnerable to pullbacks in consumer spending. It has struggled to offset higher costs and manage its inventory. A combination of self-inflicted errors and a challenging economic cycle has led many investors to run for the exits. But there's reason to believe the sell-off has gone too far.
For starters, management is implementing a clear and purposeful turnaround plan. It starts with returning the business to its roots by focusing on the in-store shopping experience. It's bringing back "Tar-ZHAY" magic by making it a destination for essentials and specialty items.
The retailer plans to deliver $15 billion in sales growth by 2030 by improving operations, expanding its rewards program, and driving customer engagement.
It wants to offer buyers items that they can't get at places like Walmart(NYSE: WMT) while limiting competition with higher-end goods and apparel. But that strategy doesn't play well in the world of e-commerce. Online shopping is all about price, not experience.
Walmart has had a ton of success with its online orders and deliveries through Walmart+ because it can compete on price and convenience even with e-commerce giants like Amazon. Whereas Target has also invested heavily in building out e-commerce -- but it hasn't been as successful.
The company has many challenges, but its strategy makes a lot of sense and plays to its strengths. Given its habit of overpromising and underdelivering in recent years, investors will likely not give Target the benefit of the doubt until its strategy proves successful.
In the meantime, investors can buy shares at a dirt cheap 11.7 price-to-earnings ratio. Target has a 4.3% dividend yield and 53 years of increasing payouts. Valuation is close to a 10-year low, while its yield is near a 10-year high.
The stock is an ideal fit for value investors looking to boost their passive income stream. And with Target forecasting essentially no growth over the next year, it only has to deliver decent results to exceed expectations.
This ETF provides exposure to a collection of high-yield energy pipeline and storage companies
Lee Samaha(Global X MLP ETF): President Trump's focus on ensuring energy independence and encouraging domestic energy production dovetails perfectly with the case for investing in this high-yield exchange-traded fund. The Global X MLP ETF invests in master limited partnerships (MLPs) in the midstream pipeline and storage facility sector.
As such, the key to the growth prospects of the stocks in this ETF is the volume growth of energy (oil, gas, LNG, and the like) in the U.S., whether it's for domestic use or export through terminals. If the Trump administration is successful in encouraging an increase in domestic production of energy, then the MLPs in this ETF will be beneficiaries, as they tend to do well when volumes increase and customers sign up for long-term deals.
The MLPs don't necessarily need higher energy prices; they need volume, which ties in with the current administration's aims. In addition to encouraging energy production, the administration also creates a conducive pipeline construction/expansion environment.
The ETF currently holds 20 stocks, including well-known high-yielding MLPs like Energy Transfer, Enterprise Products Partners, and Plains All American, all leading players in the U.S. midstream market. Consequently, the fund helps investors reduce their stock-specific risk by spreading it around multiple holdings while gaining exposure to the midstream theme.
With a current yield of 6.8% and a total expense ratio of 0.45%, the ETF represents a low-cost and reliable way to invest in the current administration's stated policy aim.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Target, and Walmart. The Motley Fool recommends Brookfield Infrastructure Partners and Enterprise Products Partners. The Motley Fool has a disclosure policy.
