The stock market has continued to climb higher, with the S&P 500 (^GSPC -0.01%) rallying over 15% in the past year. This has increased its P/E ratio from 24.2 times to 25.3x and reduced its dividend yield from 1.3% to 1.2%. As a result, the market appears expensive, and yields are less attractive.
Some stocks, however, trade at significantly lower valuations and offer higher yields despite their consistent financial performance and stable business models. Brookfield Infrastructure (BIPC 0.31%) (BIP 0.17%), Energy Transfer (ET 0.49%), and W.P. Carey (WPC -0.72%) are all trading at absurdly low levels these days. As a result, their growing dividends currently yield more than 4%.
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High growth and income for a low price
Brookfield Infrastructure plans to grow its funds from operations (FFO) by more than 10% this year, from $3.12 to at least $3.43 per share. With shares currently under $40, it trades at less than 12 times FFO. This low valuation puts its dividend yield at 4.5%.
Brookfield anticipates that its FFO per share will continue to increase at an annual rate exceeding 10%. The company forecasts organic growth of 6% to 9% per year, driven by inflation-linked contractual rate increases, higher volumes as the global economy expands, and its capital project backlog. Additionally, Brookfield expects that value-enhancing acquisitions will help boost FFO per-share growth rate into the double digits.
Brookfield's robust and rising cash flow should support ongoing dividend increases. The company has raised its dividend for 16 consecutive years at a compound annual growth rate of 9%. It aims to deliver annual increases of 5% to 9% over the long term.
A bottom-of-the-barrel valuation
Energy Transfer anticipates generating over $16.1 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) this year. Based on its current enterprise value (EV), the master limited partnership (MLP) trades at less than 9 times EBITDA. That represents the second-lowest multiple among its midstream peers, where the average is 12 times.
This very low valuation is notable, given Energy Transfer's financial strength and growth. Its leverage ratio is now in the lower half of its 4.0x–4.5x range, putting the MLP in its best financial shape in history. The company's adjusted EBITDA has grown at a 10% compound annual rate over the past five years. Although it expects growth to slow to a mid-single-digit rate this year, it anticipates a reacceleration in 2026 and beyond.
Energy Transfer is investing $5 billion in growth capital projects this year, with most scheduled to enter commercial service by the end of 2026. The company has recently expanded its backlog by adding several new projects, including the $5.3 billion Desert Southwest pipeline expansion, which it anticipates completing by the end of 2029. It has additional projects in development, such as the large-scale Lake Charles LNG facility. These investments help support the company's goal of increasing its 7.7%-yielding distribution by 3% to 5% annually.
Building back better
W.P. Carey anticipates its adjusted FFO will be in the range of $4.87–$4.95 per share this year. With shares trading around $65, the REIT sells for just over 13x FFO, significantly lower than the approximately 18x FFO for other large REITs. This lower valuation is a big reason why it has a 5.5% dividend yield.
The diversified REIT, which invests in warehouse, industrial, retail, and other properties, is currently undergoing a rebuilding phase. In late 2023, W.P. Carey began exiting the office sector through the sale and spinoff of those properties. The company also reset its dividend to align with its lower earnings and desire for a more conservative payout ratio.
W.P. Carey has spent the past year and a half rebuilding its portfolio and dividend. It invested over $2.5 billion in higher-quality properties in the last 18 months. These investments have enabled it to raise its dividend payment each quarter since early last year (up 3.4% over the past 12 months). W.P. Carey's higher-quality portfolio and strong financials suggest that its dividend will continue to rise.
Complete packages
Brookfield Infrastructure, Energy Transfer, and W.P. Carey all trade at low valuations, a big factor driving their attractive dividend yields. Strong financials support their payouts, providing flexibility to continue growing their businesses and dividends. This blend of income and growth at such attractive valuations makes these stocks very appealing investment opportunities right now.
