Income Stocks: A Once in-a-Decade Chance to Get Rich

Investing in high dividend-paying income stocks is a popular strategy among equity investors. As a company’s share prices and dividend yield are inversely related, investors can consider increasing exposure to quality high-dividend stocks amid a market downturn to benefit from outsized gains when sentiment recovers. Let’s see how.

Why should you invest in dividend stocks?

Generally, share prices fall at an accelerated pace during periods of economic uncertainty. In the last two years, valuations of capital-intensive companies across sectors have moved lower as investors are worried about lower earnings and falling consumer spending. However, it allows you to buy quality stocks at a discount and benefit from elevated dividend yields in the process.

The bear market of 2022 negatively impacted companies in sectors such as energy, utilities, real estate, and industrials. Panic selling pushed stock prices below their intrinsic value, providing Canadians with a window of opportunity to buy undervalued TSX stocks.

Historically, markets have rebounded strongly after downturns primarily led by value stocks. So, investing amid this market volatility positions investors to take advantage of the subsequent recovery and generate substantial returns.

Moreover, the market recovery since 2023 has been built on the strong performance of big tech giants. This suggests several dividend stocks continue to trade at a cheap multiple while offering you a juicy yield. Here is one such TSX dividend stock income investors can buy right now.

Brookfield Infrastructure stock

Valued at US$13.5 billion by market cap, Brookfield Infrastructure (TSX:BIP.UN) owns and operates a portfolio of cash-generating assets. These assets include infrastructure networks that facilitate the storage or movement of energy, water, data, passengers, and freight.

Brookfield is among the few infrastructure companies that invest in premier assets, resulting in high margins and a steady dividend payout.

Today, Brookfield Infrastructure pays shareholders an annual dividend of US$1.62 per share, indicating a quarterly payout of $0.405 per share and a yield of 5.5%. The company aims to grow its distributions between 5% and 9% annually, which should significantly enhance the yield-at-cost.

In the first quarter (Q1) of 2024, BIP reported funds from operations (FFO) of US$0.78 per share, an increase of 8% year over year. It attributed the growth to organic investments and acquisitions in verticals such as logistics. Moreover, BIP remains optimistic about the performance of its new data centre platforms in North America and Europe.

In its investor letter, BIP explained, “While macro debates on the pace and size of interest rate cuts by central banks has been recently influencing market behavior, we believe that investors will soon return their focus to the micro factors that are key to differentiating businesses over the long term.”

With a payout ratio of less than 60%, BIP has enough room to invest in capital expenditures, reduce balance sheet debt and target acquisitions, all of which should drive future cash flows and dividends higher.

Around 90% of BIP’s cash flows are regulated or contracted and indexed to inflation, allowing it to enjoy stable cash flows across business cycles. It is investing heavily in megatrends such as decarbonization and artificial intelligence, making BIP a top investment choice in July 2024.