The recent volatility in the S&P 500 compels me to reshare one of my core investing beliefs: Dividend stocks aren't just for income investors.
Regardless of the investing strategy you follow, you can't go wrong owning some dividend-paying stocks that can earn you a steady stream of income even during volatile times. Over time, stocks that pay regular dividends and grow their payouts consistently often also turn out to be multibaggers. Here are two such dividend stocks you'd want to double up on now.
Earn over 9% annualized returns with this dividend stock
Brookfield Infrastructure (BIPC 1.43%)(BIP 1.13%) has units of its partnership and corporate shares listed on the New York Stock Exchange. Although the two represent the same company, investors who want to avoid tax complications, such as filing K-1 federal forms, should buy the corporate shares.
The question, though, is why you should even buy Brookfield Infrastructure stock. If I had to express that in one line, I'd say Brookfield Infrastructure's asset base, business model, and dividend growth make it one of the most compelling dividend stocks to own. With the corporate shares yielding 4.7% (partnership units yield 5.7%) and down almost 15% in six months as of this writing, you'd even want to double up on this dividend stock right now.
Brookfield Infrastructure owns and operates large and regulated assets like utilities, natural gas pipelines, rail and toll roads, data centers, and fiber-optic cable networks. 85% of its free cash flows, therefore, are regulated or contracted, which means cash keeps flowing in even if the economy slows. The company also sells assets when they mature to reinvest the proceeds into potentially higher-margin assets, and the cycle repeats.
This business model has helped Brookfield Infrastructure grow leaps and bounds, with its funds from operations (FFO) per unit growing at a compound annual rate of 15% and dividend (or distribution) per unit by 9% since 2009. The chart above shows how the stock has fared since, with and without reinvested dividends. Brookfield Infrastructure corporation stock was listed in 2021 and has doubled investors' money since then with reinvested dividends.
In the long term, Brookfield Infrastructure is targeting over 10% FFO per unit growth and 5% to 9% annual dividend growth. Add in the dividend yield, and that means potential annualized returns of at least 9%. That's a solid investment for an income investor.
This 6.3%-yielding stock could pay you even bigger dividends
Enterprise Products Partners (EPD +1.42%) has already proven its mettle as a dividend stock. It has increased its dividend for more than 25 consecutive years now, and that dividend growth has hugely added to the stock's returns. In the past five years alone, investors in Enterprise Products have earned more than 250% returns with reinvested dividends. But there's a reason I am particularly bullish about this dividend stock now.
Enterprise Products is a midstream energy company with a massive pipeline network that transports natural gas, crude oil, natural gas liquids, petrochemicals, and refined products. It has spent billions of dollars on expansion in recent years and is nearing the completion of most of its projects. To put some numbers to that, $6 billion of the $7.6 billion of major projects under construction are slated to go into service this year. Projects include several gas processing plants in the Permian Basin and a natural gas liquids pipeline currently under expansion.
I expect these projects to start contributing to Enterprise Products' cash flows later this year. Meanwhile, with the company's growth capital expenditures expected to taper from $4 billion-$4.5 billion in 2025 to $2 billion-$2.5 billion in 2026, Enterprise Products should have more cash available for distribution to its shareholders in the form of dividends and share buybacks. With the stock also yielding 6.3%, it's an opportune time to double up on this dividend growth stock.
