Why You Won't Want to Overlook This Top Dividend Stock's Supercharged Growth Catalyst

Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP) has been a steady grower over the years. The diversified global infrastructure giant has capitalized on several growth catalysts, including inflation-linked rate increases, volume growth as the global economy expands, capital projects, and accretive acquisitions. These drivers have given it the fuel to increase its high-yielding dividend, which currently stands at over 4%, for 16 straight years, including by 6% for 2025.

The company is in a better position to grow shareholder value than ever before. Fueling that view is its growing exposure to the digitalization megatrend. Here's a look at why investors won't want to overlook this major growth catalyst.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

A massive megatrend

Brookfield Infrastructure has positioned its global portfolio to capitalize on a trio of megatrends it has dubbed the "three Ds," which stands for decarbonization, deglobalization, and digitalization. All four of the company's operating platforms -- utilities, energy midstream, transportation, and data -- should benefit from one or more of those investing megatrends over the coming decade.

The company sees the biggest boost coming from digitalization. CEO Sam Pollock wrote about this investment theme in the company's fourth-quarter letter to shareholders: "Digitalization and rapid advancements in technology are expected to be primary growth drivers for the global economy in the years ahead. This has led to a step change in the capital required to support the exponential increase in data creation, storage, and processing needs."

Companies, especially in the technology sector, are investing unprecedented amounts of money into building out the data infrastructure needed to support cloud computing, artificial intelligence, and other digitalization efforts. These companies will also need a tremendous amount of energy in the coming years to power their data centers, which use significant electricity, especially when running AI applications. That will require companies in the energy sector to invest heavily in building additional infrastructure to support higher natural gas and power demands.

Well aligned with this trend

"Our business is well positioned to capitalize on the ongoing digitalization megatrend, which we see as the leading investment theme in infrastructure today," wrote Pollock in his fourth-quarter letter to investors. He added: "Over 60% of our FFO [funds from operations] is already derived from sectors at the forefront of this digital transformation including data, midstream, and utilities. This exposure will only grow as we advance our substantial backlog of organic growth projects, which is heavily weighted toward projects required to accommodate the growing demand from technology companies."

Pollock noted that the company has already invested $3.6 billion into data centers over the past six years and more than $9 billion into data infrastructure overall, including fiber networks and telecom towers. That investment is growing as the company continues to pour capital into building out additional data infrastructure. For example, it has lined up about $1.4 billion of large-scale data center development projects worldwide backed by long-term contracts with high-quality customers. It's also investing in large-scale semiconductor fabrication facilities.

About 40% of the company's $8 billion capital project backlog is data infrastructure projects. Given the size of its backlog, "much of our data segment's value is not yet reflected in our current financial metrics," Pollock said. "However, as projects come online, we expect them to contribute meaningfully to earnings and drive overall growth over the next three years."

Meanwhile, that backlog should grow. Pollock noted that the company has a very deep opportunity set of early stage capital deployment opportunities related to digitalization because of the immense need for capital to invest in infrastructure worldwide. "This creates ample opportunities for large-scale, well-capitalized, global infrastructure owners and operators like us," Pollock said. He added: "We expect growth in this sector to persist, outpacing all other areas of our business and positioning it to become our largest sector within five years. We are also excited by the deployment opportunities in other segments of our portfolio that are benefiting from digitalization, such as midstream and utilities, both of which we expect to be active deploying capital in the years ahead."

The growth expected from digitalization helps cement Brookfield Infrastructure's view that it can deliver robust earnings growth in the coming years. It continues to target 10%-plus annual FFO per share growth over the long term. That should support dividend growth of 5% to 9% per year.

A powerful growth driver

Brookfield Infrastructure has a diversified business with multiple growth drivers. However, its exposure to the data infrastructure investment megatrend is one factor that investors won't want to overlook. It should help provide it with the fuel to grow its FFO per share at a more than 10% annual rate, which should also allow it to continue increasing its high-yielding dividend at a healthy pace. That combination of income and growth could help power total annualized returns in the mid-teens. That makes Brookfield Infrastructure look like an excellent stock to buy and hold for the long term.

Should you invest $1,000 in Brookfield Infrastructure right now?

Before you buy stock in Brookfield Infrastructure, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Brookfield Infrastructure wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $735,852!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

Learn more »

*Stock Advisor returns as of January 27, 2025

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