If I could only buy 1 dividend stock in September, this would be the best choice

I buy a lot of dividend stocks. I focus on dividends because they have proven to be powerful wealth creators. Over the past 50 years, dividend payers have outperformed average stocks in S&P 500 — their average annual total return of 9.2% beats the 7.7% produced by an equally weighted S&P 500 index. Dividend makers and originators did most of the heavy lifting, posting an annualized return of 10.2%, compared to 6.7% for companies with no change in their dividend policy.

Given the strength of dividends, I tend to invest in several dividend stocks each month. However, if I had to pick just one to buy in September, this would be it Brookfield Infrastructure (BIPC 1.05%) (BEEP 0.17%). Here’s why.

A history of dividend growth and wealth creation

Brookfield Infrastructure was formed about 15 years ago as a spin-off of the company now known as Brookfield. He was a phenomenal wealth creator during that time. The global infrastructure giant has increased its dividend every year, increasing its payout at a compound annual rate of 9%. Not only has the stock outperformed the S&P 500 over that period, with an average annual total return of 14.9%, compared to the index’s average return of 10.8%, but its dividend yield is about three times that today, reaching only 4% at Friday’s closing price.

Several factors have contributed to the company’s ability to produce such strong dividend and yield growth. An important one is the overall stability of his portfolio. Brookfield Infrastructure’s businesses generate stable cash flow supported by long-term contracts and government-regulated rate structures. The company says 85% of its funds from operations (FFO) are either hedged or indexed to inflation. This gives it a stable cash flow that tends to grow by 3% to 4% annually.

Brookfield Infrastructure also benefits from a strong financial profile. It has a reasonable dividend payout ratio (60% to 70% of its stable cash flows), a solid investment balance sheet, and plenty of cash that it routinely replenishes through capital recycling. The company uses its financial flexibility to invest in expansion projects and make acquisitions. These catalysts and other organic factors have allowed Brookfield Infrastructure to grow its FFO per share at a compound annual rate of 15% since its formation.

Multiple growth catalysts

The company expects to continue to grow rapidly in the future. It has positioned its portfolio to capitalize on three major investment megatrends: digitization, decarbonization and deglobalization. Everyone has a long growth track ahead of them.

Brookfield Infrastructure has built a big data infrastructure platform to capitalize on the digitization megatrend. It has acquired several data center development platforms, cell tower operators and fiber optic networks. The company has also collaborated with Intel to build two new semiconductor manufacturing plants in the US

The company has also acquired several companies in the transportation, mid-energy and utilities sectors to capitalize on the other two major megatrends. It tends to acquire scalable platforms that it can grow through investments in capital projects and direct acquisitions. It currently has a record $7.6 billion in capital that it expects to complete in the next two to three years. Meanwhile, M&A activity is expected to pick up in the second half of this year, adding a potential growth accelerator for 2025 and beyond.

Brookfield Infrastructure estimates that its platforms can grow its FFO per share organically by 6% to 9% per year through a combination of inflation-driven rate growth, volume growth as the global economy expands and development projects. Meanwhile, it believes increased acquisitions funded by capital recycling will boost its FFO growth rate to double digits. This forecast easily supports the company’s plan to increase its dividend (which already yields 4%) by 5% to 9% per year.

Strong total return potential

Brookfield Infrastructure has an exceptional track record of dividend growth and shareholder value. This should continue in the future. It expects to increase its dividend payout by 5% to 9% annually while growing its cash flow per share at a double-digit annual rate. That should give him the fuel to produce average annual totals in his mid-teens. That robust total return potential from such a low-risk company is why I’d pick Brookfield Infrastructure above all others if I could buy just one dividend stock in September.