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Brookfield Infrastructure Partners LP(BIP-N)

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Get Rich Slow With These Phenomenal Dividend Stocks

Motley Fool - Sun Feb 18, 4:34AM CST

A lot of people chase riches. We'll invest our hard-earned money in all sorts of things we think can quickly make us rich. Unfortunately, most get-rich-quick schemes have the opposite outcome of making us poorer.

A better approach is to slowly build your wealth. For example, investing $300 into the stock market each month could grow into $1 million in 35 years (assuming it maintains its historical pace of delivering a 9.4% average annual return as it has over the last 50 years).

You could get rich a little faster by investing in stocks that grow their dividends (they've delivered a 10.2% average annual return over the past 50 years). Three phenomenal dividend stocks for those seeking to slowly build their wealth are Realty Income(NYSE: O), Brookfield Infrastructure(NYSE: BIPC)(NYSE: BIP), and Enbridge(NYSE: ENB).

Building wealth one property at a time

Realty Income is a real estate investment trust (REIT) that owns an increasingly diversified portfolio of income-producing commercial real estate. It owns freestanding retail (like grocery stores, pharmacies, and home improvement centers), industrial (warehouses and light manufacturing), and other properties (including casinos, vertical farms, and data centers). The REIT focuses on investing in properties that supply durable rental income from tenants largely immune to disruption from e-commerce or an economic downturn.

The REIT uses that steady income to pay an attractive dividend (currently yielding 6%) that it steadily increases. Realty Income has raised its dividend 123 times since its public market listing in 1994, growing it at a 4.3% compound annual rate. The company's consistent earnings and dividend growth have helped it deliver a 13.4% compound annual total return since it came public.

Realty Income is in a strong position to continue growing shareholder value. The REIT aims to grow its adjusted funds from operations (FFO) by 4% to 5% per share over the long term (roughly matching its historical growth rate). The company believes it can achieve that level of growth by using its top-tier financial profile to continue acquiring income-producing real estate. Given its current dividend yield, Realty Income could produce an average annual total return of 10% to 11% per year if it achieves its growth target.

Lots of fuel to grow shareholder value

Brookfield Infrastructure owns a globally diversified portfolio of critical infrastructure networks like utilities, pipelines, toll roads, and data centers. The company leases capacity on its assets under long-term contracts and government-regulated rate structures. These agreements supply it with stable and growing cash flow, with most of its rates linked to inflation.

The company uses its stable cash flow to pay an attractive dividend (currently yielding 4.7%) and invest in expansion projects. Brookfield estimates that its organic drivers (inflation-linked rate increases, expansion projects, and volume growth as the global economy expands) will drive 6% to 9% annual FFO per share growth. On top of that, Brookfield believes that acquisitions could provide an additional boost to its bottom line (its FFO grew by 10% last year, 8% organically, and 2% from acquisitions). That supports the company's plan to increase its dividend at a 5% to 9% annual rate over the long term.

Brookfield's multi-pronged growth strategy has created a lot of value for investors over the years. It has increased its dividend for 15 straight years while growing its payout at an 8% compound annual rate over the last decade. Meanwhile, it has produced robust total returns of 14% annualized since its inception. Given its current yield, it could easily produce 10%+ annual total returns in the future.

A powerful wealth creator

Canadian pipeline and utility giant Enbridge has a knack for enriching its investors. The company has increased its dividend for 29 straight years while delivering an industry-leading 11.4% total shareholder return since the Great Recession.

Enbridge is in an excellent position to continue growing shareholder value. The company expects to grow its earnings at around a 5% annual rate over the medium term. The main fuel is its extensive capital project backlog. Enbridge has billions of dollars of energy infrastructure projects under construction, including natural gas pipelines, offshore wind farms, natural gas utility expansions, and other lower-carbon energy projects. On top of that, the company has the financial capacity to make acquisitions. It's currently in the process of buying three U.S. natural gas utilities that will enhance the sustainability of its cash flow.

The company's visible growth should give it plenty of power to continue increasing its already attractive 8%-yielding dividend. Add that yield to its projected growth rate, and Enbridge should have the fuel to continue producing double-digit average annual total returns.

Potentially enriching investments

Investing in dividend stocks won't make you rich overnight. However, they have proven to slowly enrich their investors as they grow their earnings and dividends. That has certainly been the case with Realty Income, Brookfield Infrastructure, and Enbridge over the years. With more growth ahead, they could continue to be very enriching investments in the decades to come.

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Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, Enbridge, and Realty Income. The Motley Fool has positions in and recommends Enbridge and Realty Income. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

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