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Brookfield Infrastructure Partners LP(BIP-N)

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Forget Buying a Lottery Ticket. Stake Your Claim in This $1.7 Trillion Annual Jackpot Instead.

Motley Fool - Sat Mar 23, 4:16AM CDT

Americans spend more than $100 billion per year on lottery tickets. Most of those tickets end up worthless.

Investing that money in dividend stocks is a better bet than buying a lottery ticket. Companies around the world paid out a whopping $1.7 trillion in dividends last year, according to research from Janus Henderson Global. In addition to that income, most dividend stocks increase in value over time. On average, dividend-paying stocks have delivered a 9.2% annual total return over the last 50 years, according to Hartford Funds and Ned Davis Research. Investing as little as $20 per month into dividend stocks could grow into $1 million in about 65 years. Invest more money or in higher-returning dividend stocks, and you could become a millionaire even faster. You could then live off the income your dividend stocks pay each year.

There are lots of great dividend stocks. Two high-quality dividend stocks are Realty Income(NYSE: O) and Brookfield Infrastructure(NYSE: BIPC)(NYSE: BIP). They have been very enriching investments over the years, which seems likely to continue.

Grow your wealth with this REIT

Realty Income is a real estate investment trust (REIT) with a diversified portfolio of income-producing commercial real estate. It owns grocery stores, pharmacies, convenience stores, warehouses, casinos, and data centers. These properties generate steady rental income that Realty Income uses to pay an attractive and growing monthly dividend. The REIT currently has a dividend yield of 5.9%. At that rate, it could turn every $1,000 invested in its stock into $59 of annual dividend income (about $4.92 per month). The more money you invest, the more income you can earn.

The REIT has a long history of increasing its dividend. It has raised its payout 124 times since its public market listing in 1994, including for the last 106 straight quarters. That growing dividend has helped Realty Income produce a strong 13.4% average annual total return. That has grown a $100 investment in 1994 into over $4,500 today.

Realty Income should be able to continue producing an attractive total return. It aims to grow its funds from operations (FFO) per share by 4% to 5% annually over the long term, driven by rent growth and investing in additional income-producing real estate. Add that to its nearly 6% dividend yield, and Realty Income could produce an average total return of 10% to 11% per year. Because of that, it could be a very enriching long-term investment.

A proven wealth creator

Brookfield Infrastructure owns a diversified portfolio of critical infrastructure assets in the utilities, energy midstream, transportation, and data sectors. These businesses generate very predictable cash flow to support its 5.5%-yielding dividend.

The company has increased its quarterly dividend every year since its formation 15 years ago, including by another 6% earlier this year. Brookfield's growing FFO and dividend have helped power a robust 14.6% average annual total return since its formation.

Brookfield Infrastructure is in an excellent position to continue growing value for its shareholders. The company's infrastructure portfolio can organically grow its FFO per share by 6% to 9% per year over the long term. Powering that growth is inflation-linked rate increases, volume growth as the global economy expands, and expansion projects funded with retained cash flow after paying its dividend. That organic growth easily supports Brookfield's plan to increase its dividend by 5% to 9% per year.

On top of that, Brookfield has another growth catalyst. The company routinely sells mature assets and recycles the capital into higher-returning new investments. Last year, it sold $1.9 billion of assets to fund $2 billion of new transportation and data investments, including three data center platforms. Brookfield's capital recycling activities drive its view that it can continue growing its FFO per share by more than 10% annually. Add in its high-yielding dividend, and Brookfield should easily have enough power to produce total returns in the mid-teens each year.

Don't gamble away your money

Most lottery tickets lose money. Because of that, you should forget about buying them and instead invest that money in dividend-paying stocks. That will allow you to tap into these wealth-creating machines. Steadily investing in high-quality dividend stocks like Realty Income and Brookfield Infrastructure could enable you to hit the jackpot slowly as those investments pay growing dividends and rise in value.

Should you invest $1,000 in Realty Income right now?

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

Paid Post: Content produced by Motley Fool. The Globe and Mail was not involved, and material was not reviewed prior to publication.

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