This past week was a very choppy period for the market. Concerns about the banking sector weighed on most stocks. Those fears could continue to grow, especially if more banks face troubles.
During times like this, I like to add to some of my highest conviction positions. I did that this past week, buying more shares of American Tower (AMT -0.59%), Brookfield Infrastructure Partners (BIP 2.82%), and NextEra Energy (NEE 0.34%). Here's why I increased my positions despite all the turmoil in the market.
1. Trading at an attractive yield
American Tower is down nearly 30% from its 52-week high. That sell-off has driven the data infrastructure REIT's dividend yield to around 3%. It's near its highest level over the past decade:
AMT Dividend Yield data by YCharts.
Another factor driving American Tower's rising yield is dividend growth. The company has increased its dividend payment by 12.5% over the past year. The REIT sees more dividend growth ahead. It expects to increase its payment by another 10% this year.
That increase comes even though the company is facing some growth-related headwinds from higher interest rates, foreign exchange fluctuations, and customer issues. However, American Tower believes those near-term headwinds will begin to fade after this year. CFO Rod Smith concluded his prepared remarks on the company's fourth-quarter conference call with an optimistic outlook. He stated: "As we look ahead, we expect to further build on the successes of the recent years and leverage our portfolio to drive strong recurring growth on the back of consistent secular technology trends for many years to come." Growing data usage should drive the need for more infrastructure. That should enable American Tower to continue expanding its infrastructure portfolio, driving earnings and dividend growth.
2. An unbelievable discount
Brookfield Infrastructure Partners is a unique opportunity these days. The publicly traded partnership trades at a steep discount to its corporate twin, Brookfield Infrastructure Corporation (BIPC 0.84%), even though they're economically equivalent entities:
Because of that, investors can grab units of the partnership at a much lower valuation (10.3 times FFO vs. 14.5 times) and higher yield (4.9% vs. 3.5%).
That gives me an even better entry point into this proven value creator. Brookfield Infrastructure has delivered a 16% average annualized total return since its inception in 2008. That has pulverized the S&P 500's 10% average annualized total return during that timeframe. Brookfield's ability to grow its FFO and dividend at strong rates has powered those strong returns.
The company grew its FFO per unit by 12% last year while increasing the distribution by another 6%. It benefited from elevated inflation rates, economic growth, expansion project completions, and its capital recycling strategy. Those catalysts will continue driving growth this year. The company expects its FFO to rise by more than 10% per unit in 2023. Meanwhile, it sees its organic growth drivers powering 6% to 9% annual FFO per share expansion over the long term, with capital recycling providing an additional boost to the bottom line. That supports Brookfield's plan to grow its distribution by 5% to 9% per year.
3. Plenty of power to continue growing
NextEra Energy is another proven value creator. The clean-energy-focused utility has grown its adjusted earnings per share at an 8.3% compound annual rate since 2007. Meanwhile, the company has expanded its dividend at a 9.9% compound yearly pace. Those dual drivers have helped power an 18% average annual total return over the last 10 years. That has significantly outpaced the S&P 500's 11.7% average annual total return. With the stock recently down 17% from its 52-week high, it's a great opportunity to scoop up more shares of this wealth-creating machine.
NextEra Energy has the power to continue growing its earnings and dividend at above-average rates. The company expects to grow its earnings per share by as much as a 9.4% compound annual rate through 2026 at the high end of its guidance range off 2021's base. Meanwhile, it anticipates increasing its dividend by about 10% year through at least 2024.
The company has an extensive backlog of capital projects to help power that forecast. Meanwhile, the outlook for clean energy investment has only gotten brighter with the passage of the Inflation Reduction Act. That legislation puts clear investment incentives in place for a long time. It should provide the company with more attractive investment opportunities to continue powering its growth in the years to come.
Great companies at lower values
American Tower, Brookfield Infrastructure Partners, and NextEra Energy have wonderful track records of enriching their investors. They have consistently grown their earnings and dividends, enabling them to produce attractive total returns. I firmly believe they can continue growing shareholder value in the future. Because of that, I've continued to take advantage of their sell-offs to add to my positions in these high-conviction ideas this year.
