We recently compiled a list of the 13 Best Dividend Stocks to Buy Under $50. In this article, we are going to take a look at where Brookfield Infrastructure Partners L.P. (NYSE:BIP) stands against the other dividend stocks.
AI stocks are stealing the spotlight today as the appetite for these services continues to gain traction globally. This surge in interest has temporarily diverted investor attention from dividend-paying equities. This year, dividend stocks have once again lagged behind the market, a trend highlighted by Dan Lefkovitz, a strategist at Morningstar Indexes, during a recent interview with the firm. Here are some commeants from the analyst:
“I just want to mention two interesting observations. One, interest rates have come down this year, yet dividend-paying stocks have underperformed. There’s this conventional wisdom that we’ve talked about in the past that falling rates are good for dividend payers and rising rates are bad for dividend payers, yet dividend stocks have underperformed in a falling rate environment. Second, outside of the US, dividend stocks are a little bit ahead of the broad market. We can table those, but I just thought they’re interesting to note.”
That said, analysts predict this trend won’t persist, as dividend stocks are expected to regain their strength and prominence soon. Bank of America analyst Ohsung Kwon suggested that a dividend revival might be on the horizon. His team anticipates a 10% increase in overall dividends from the companies in the broader market in 2025, driven by investors’ growing preference for cash. Highlighting this trend, major tech firms began paying dividends for the first time this year. According to Janus Henderson, these tech giants accounted for roughly 25% of the total underlying dividend growth in the US during the third quarter.
Also read: 10 Best European Dividend Stocks To Buy
When it comes to dividend stocks, analysts consistently recommend prioritizing dividend growth over chasing high yields. Dan Lefkovitz, a strategist with Morningstar’s Index team, emphasized this approach, pointing out that dividend growth is a completely different ball game compared to high-dividend investing. He explained that dividend growth signals a company’s strong competitive position and improving prospects. A dividend-growth portfolio typically mirrors the market more closely in terms of sector exposure and growth-versus-value traits, including metrics like price-to-earnings ratios. While it maintains a value bias, it leans more toward the core market than a high-dividend portfolio.
Over the years, companies with a track record of steadily increasing their dividends have generally outperformed non-dividend-paying firms while experiencing lower volatility. Although dividends are not set in stone and can vary, as seen in the current climate, they have significantly contributed to overall equity returns over time. Between 1930 and 2023, dividends and their reinvestment made up 40% of the annualized total returns in the broader market, with the rest driven by capital gains.
Maintaining steady dividend growth is a demanding goal, as it necessitates exceptional financial stability. For businesses still in their growth phase with relatively lower stock prices, assessing the sustainability of their dividends becomes an essential and simple factor to analyze. This article explores some of the top dividend stocks currently priced under $50.
Our Methodology:
For this list, we used a Finviz stock screener to find dividend stocks trading below $50 as of the close of December 20. From the initial list, we narrowed down the selection to companies that pay regular dividends to shareholders and possess strong dividend policies, ensuring consistent future dividends. From the resultant list, we picked 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s Q3 2024 database of 900 hedge funds and their holdings. These stocks are ranked in ascending order of hedge funds having stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
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Brookfield Infrastructure Partners L.P. (NYSE:BIP)
Number of Hedge Fund Holders: 15
Share Price as of the Close of December 20: $31.36
Brookfield Infrastructure Partners L.P. (NYSE:BIP) is a Canadian limited partnership that specializes in acquiring and managing infrastructure assets worldwide. The company boasts strong diversification, with over 45 businesses spanning four key sectors: utilities, midstream, data, and transport infrastructure. While two of these businesses generate more than 10% of the company’s funds from operations (FFO), it is well-equipped to handle economic challenges. Nearly 90% of its FFO is derived from regulated or contracted sources, providing reliable and stable cash flows.
In the third quarter of 2024, Brookfield Infrastructure Partners L.P. (NYSE:BIP) reported revenue of $5.27 billion, up from $4.5 billion in the same period last year. The company performed strongly, successfully meeting its strategic goals, including achieving its $2 billion capital recycling target for the year. As interest rates decline, the company has entered a new market environment characterized by increased deal activity. This has generated a substantial investment pipeline, further supported by growth in sectors tied to AI and the associated energy demands.
In addition, Brookfield Infrastructure Partners L.P. (NYSE:BIP)’s cash position also remained strong. It ended the quarter with over $1.6 billion available in cash and cash equivalents and its total assets amounted to over $105.2 billion. In the first nine months of the year, the company generated $3.1 billion in operating cash flow, growing from $2.6 billion in December 2023.
Brookfield Infrastructure Partners L.P. (NYSE:BIP) currently offers a quarterly dividend of $0.405 per share and has a dividend yield of 5.06%, as of December 23. It is one of the best dividend stocks on our list as the company maintains a 16-year track record of consistent dividend growth.
As of the close of Q3 2024, 15 hedge funds tracked by Insider Monkey held stakes in Brookfield Infrastructure Partners L.P. (NYSE:BIP), up from 14 in the previous quarter. These stakes have a total value of approximately $207 million. With over 5.4 million shares, Select Equity Group was the company’s leading stakeholder in Q3.
Overall BIP ranks 12th on our list of the best dividend stocks to buy under $5. While we acknowledge the potential of BIP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BIP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.