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Why Brookfield Infrastructure Partners (BIP) is a Great Dividend Stock Right Now

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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

Based in Hamilton, Brookfield Infrastructure Partners (BIP) is in the Finance sector, and so far this year, shares have seen a price change of 18.88%. The operator of utility, transportation and energy assets is paying out a dividend of $0.38 per share at the moment, with a dividend yield of 4.15% compared to the REIT and Equity Trust - Other industry's yield of 4.56% and the S&P 500's yield of 1.73%.

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Looking at dividend growth, the company's current annualized dividend of $1.53 is up 6.3% from last year. In the past five-year period, Brookfield Infrastructure Partners has increased its dividend 4 times on a year-over-year basis for an average annual increase of 3.08%. 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. Right now, Brookfield Infrastructure's payout ratio is 55%, which means it paid out 55% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BIP for this fiscal year. The Zacks Consensus Estimate for 2023 is $3.07 per share, representing a year-over-year earnings growth rate of 13.28%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BIP presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).

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