Dividend growth stocks can make for the best investments. The best ones are sometimes companies that might not pay the highest yields, but have great records of dividend growth. But every so often, a company comes along with both a high dividend yield and a history of growing the payout every year.
On Oct. 29's Motley Fool Live, "The Wrap" host Jason Hall described how Brookfield Infrastructure Partners (BIP 0.35%), one of the dividend stocks he's owned the longest, has been a winning investment in his portfolio for almost a decade.
Jason Hall: The stock that I've owned the longest that I bought, specifically, because of its track record is a strong, dividend investment is Brookfield Infrastructure. It's Brookfield Infrastructure Partners, BIP. They also have a corporate equivalent that's BIPC. Danny, if you don't mind throwing those in the chat, I would appreciate it. BIPC is a newer entity, BIP has been around for over a decade.
But I just I want to overlay the Brookfield Infrastructure Partners returns over that same period against Activision Blizzard. I'm going to just clean this up a little bit. I'm going to start just with the price. You go back over that same since 2010 period, Brookfield Infrastructure Partners stock price has still done well, 288% in stock price appreciation is pretty good. But that's not anywhere near as good as Activision Blizzard's has done.
Now, the difference between these businesses is the Brookfield Infrastructure, everybody knows what Activision Blizzard is, this is the big video games company. Brookfield Infrastructure owns the hidden assets that make the modern world work. Like natural gas, transmission, power transmission, water utility, ports, toll roads, fiber optic telecommunication, and stuff like that. It's these big, expensive, steady cash flow assets that they're like oxygen. We don't even notice them when it's around, but take it away, and oh my goodness, you feel the pain.
But here's the thing, now, you look at the total return, and Brookfield Infrastructure has done quite well, almost 550% in total returns. Again, it doesn't match what Activision Blizzard has done over that same period. But the difference, and again, this is mainly just the difference in the model of the businesses because this is more of like that infrastructure, like the utility kind of model. You're looking at a dividend yield that has consistently been around 5% over that decade. There has been some peaks and valleys and that sort of thing.
But it's a much higher yield because, again, it's a business that's built on that. And then you look at the dividend growth. It's another one that has consistently been able to regularly grow that dividend payout. The takeaway here is you can get great returns both ways.
But if I were an investor that was prioritizing income for now, that's where you think about a company like Brookfield Infrastructure because it's an excellent business. You have to start there, it's an excellent business. They're in an area where there's great macro tailwinds because the global middle class is growing like wildfire. I talk about this every time I'm on Motley Fool Live. We hear this, the narrative in the US is the shrinking middle-class, and it's a true narrative. We're 30 years of the middle class getting smaller and losing ground.
But that's not necessarily the case in a lot of the rest of the world, the global middle class is going to grow by a billion people over the next decade. It's just this boom of people that are going to have extra money. The middle class just means you have money in your pocket that -- you have disposable income. These are people that are going to want fresh, clean running water. They're going to be a lot of them in urban environments, that today, they don't have modern infrastructure to meet the capacity of the number of people that are going to be there 10 years from now. There's this big macro tailwind, and again, it's because these are utility type businesses that generate that steady cash flow. No matter what the economic environment is, they deliver those solid results.
You start with a great business, and then because it's built to generate high yield dividends, this is the kind of stock that can please you with really steady cash flows and give you that income for now. But also, can serve as a great investments to generate total returns for somebody like myself.
