Market downturns like the one we’ve seen this year can present excellent opportunities for dividend investors. As stock prices decrease, dividend yields increase, allowing investors who purchase high-quality dividend stocks during these declines to secure a more attractive income stream.
This year, two prominent dividend stocks that have experienced downturns are Realty Income (NYSE: O) and Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP). Both have dropped over 12% from their peak within the past year. Here’s why missing out on these purchases could leave dividend investors regretting their decisions.
Realty Income shares have decreased by over 12% from their highest point in the last year, resulting in a dividend yield rise to 5.7%. This yield makes it an attractive option for investors seeking robust dividend stocks.
The decline in Realty Income’s stock price has made its valuation more appealing. Last year, the REIT generated adjusted funds from operations (FFO) of $4.19 per share, and with its current stock price around $57, it trades at approximately 13.5 times its FFO. This valuation is quite low compared to many of its peers, who often trade at more than 15 times FFO.
Realty Income boasts an impressive dividend history, having increased its payments 130 times since becoming publicly traded over 30 years ago. This company has a consistent 30-year streak of dividend increases, with its payouts growing at a 4.3% compound annual growth rate over the last three decades.
Brookfield Infrastructure shares have also faced a significant drop, falling more than 21% from their recent high, which has raised its dividend yield to 4.9%. This global infrastructure leader has a strong record of increasing dividends for 16 consecutive years, growing its payout at a 9% compound annual growth rate. The company is optimistic about ongoing dividend growth, targeting annual increases of 5% to 9%.
With an estimation of $100 trillion needed for global infrastructure investment over the next 15 years, Brookfield Infrastructure is poised for significant growth. The company also has substantial expansion projects underway and predicts over 10% annual growth in its FFO per share due to various factors, including capital projects and inflation-driven rate adjustments.
In conclusion, the sell-offs affecting Realty Income and Brookfield Infrastructure have increased their dividend yields while lowering valuations. These stocks stand out as attractive investments since they are likely to continue their dividend growth and yield strong total returns in the long run, making it a potential regret for investors to miss this buying opportunity during the current market decline.
