This 4%-Yielding Dividend Stock Is a Top Buy for Income and Upside in 2025 and Beyond

Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP) offers investors the best of both worlds. The global infrastructure operator pays a very attractive dividend (more than 4% yield). On top of that, it's growing briskly (more than 10% annually).

Those dual catalysts should enable the infrastructure stock to continue producing strong total returns in 2025 and beyond. That makes it a top buy for income and upside as we head into the new year.

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A rock-solid income stream

Brookfield Infrastructure has been an exceptional income stock over the years. The company has increased its payment every year since it came public (15 years in a row). It has grown its dividend at a healthy 9% compound annual rate during that time frame.

The company's high-yielding payout is on a very sustainable foundation. Brookfield Infrastructure's diversified portfolio of utility, energy midstream, transportation, and data infrastructure businesses generates very predictable cash flow. About 85% of its funds from operations (FFO) come from contracted or regulated assets, with that same percentage protected from or indexed to inflation.

Brookfield pays out 60% to 70% of its stable cash flow in dividends, retaining the rest to fund additional infrastructure investments. It also has a strong investment-grade rated balance sheet and significant liquidity that it routinely replenishes by recycling capital.

High-powered growth

The infrastructure operator is on track to grow its FFO per share by more than 10% again this year. The company has delivered 15% compound annual FFO per-share growth since its formation in 2009 and expects to continue delivering double-digit FFO per-share growth in 2025 and beyond.

Brookfield has a strong base organic growth rate. It expects a combination of inflation-indexed rate increases, volume growth as the global economy expands, and reinvested cash flow into development projects to drive 6% to 9% annual FFO per-share growth. It currently has a record backlog of organic growth projects ($8 billion) and another $4 billion of projects under development. The company's organic growth drivers alone should support its dividend growth target of 5% to 9% annually.

On top of that, Brookfield routinely recycles capital by selling mature assets to fund higher-returning new investments. This strategy has historically driven its FFO growth rate into the double-digits. The company's current investment pipeline is as big as it has been in two years and continues to grow.

The company sees robust growth opportunities in the coming years, organically and inorganically. It estimates that the world will need to invest $100 trillion to maintain, upgrade, and build infrastructure over the next 15 years, which includes $8 trillion on artificial intelligence (AI)-related infrastructure over the next three to five years. Brookfield expects to capture an appropriate share of this massive opportunity.

A compelling value

Brookfield Infrastructure is on track to grow its FFO per share by more than 10% this year from last year's baseline of $2.95, which implies at least $3.25 per share of FFO in 2024. With its share price below $40 these days, Broofield trades at about 12 times its FFO.

That's dirt cheap, compared to the broader market. The S&P 500 currently trades at a forward price-to-earnings ratio (P/E) of more than 22 times. Brookfield's lower valuation is a big reason why it offers a higher relative yield (the S&P 500 yields about 1.2%).

Powerful total return potential

Brookfield Infrastructure is a very compelling investment opportunity these days. It pays a high-yielding dividend that it plans to continue growing at a healthy rate. The company also has strong growth prospects, which drives its view that it can continue growing its cash flow per share at a more than 10% annual rate.

Meanwhile, it trades at a very attractive valuation. Add everything up, and Brookfield has the potential to produce high total returns in 2025 and beyond, making it a great buy right now.

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