By investing in weak dividend stocks, you can benefit from higher returns and the possibility of capital gains. In this article, I identified a top-quality Canadian dividend stock that is down 11% from its all-time high and offers a forward yield of almost 5% through December 2025.
Valued at a market capitalization of over $20 billion, Brookfield Infrastructure Partners (TSX: BIP.UN) manages key infrastructure assets globally across four main segments.
- The Utilities segment operates electric transmission lines, natural gas pipelines and millions of utility connections.
- The Transport segment operates extensive rail networks and highways covering thousands of kilometers.
- The Midstream segment provides the transportation, processing and storage of natural gas through pipelines and processing plants.
- The data segment offers telecommunications towers, fiber optic networks, data centers and semiconductor manufacturing facilities.
Brookfield operates in the United States, Canada, Brazil, India, Australia and other countries, providing critical infrastructure services for energy, transportation and digital connectivity.
TSX stock has returned 124% to shareholders over the past decade. Adjusting for dividend reinvestments, the cumulative return is closer to 242%. Brookfield Infrastructure shares have returned more than 1,530% to shareholders in dividend-adjusted earnings since its 2009 IPO.
Is the TSX Dividend Stock Still a Good Buy?
The bull case for the TSX dividend stock
Brookfield Infrastructure Partners is positioning itself at a key inflection point and expects to return to annual growth rates above 14% over the next five years, after growing 10% in recent years.
It recently outlined an aggressive expansion strategy aimed at capitalizing on AI infrastructure buildout, which the company views as a multi-generational investment opportunity, similar to historical infrastructure cycles such as the development of railways and power grids.
Brookfield is pursuing seven AI factory projects in five countries that collectively represent six gigawatts of computing capacity, three million GPUs (graphics processing units) and $200 billion in total capital deployment over time.
The AI opportunity comes as Brookfield has scaled its core business. Over the past five years, the company’s organic growth from its capital backlog has quadrupled.
The number of high-growth platform companies Brookfield owns has more than doubled and its asset rotation program has increased fivefold, creating a self-financing mechanism for new investments at the lowest cost of capital.
Brookfield has already raised more than $3 billion in asset sales this year, achieving a 20% internal rate of return. Management expects these proceeds to be deployed in higher yield investments, at 15% to 17% versus the 11% cost. These investments could create up to $6 billion in additional value based on this year’s revenue alone.
Are BIP shares still undervalued?
Analysts tracking BIP stock predict that adjusted financing from operations (AFFO) per share will rise from $2.35 in 2024 to $3.30 in 2027.
During this period, the annual dividend per share is expected to increase from US$1.62 to US$1.93. It suggests BIP’s payout ratio will improve to 58% from 69% in 2024, giving the company the flexibility to reduce balance sheet debt and pursue acquisitions.
The top dividend stock is expected to end 2029 with an annual dividend of $2.21 per share, compared to just $0.93 per share in 2016, significantly improving its yield at cost.
If BIP stock is priced at twelve times forward AFFO, which is quite cheap, it could rise 10% over the next twelve months. If we adjust dividends, the cumulative return could be closer to 15%.
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