Dividend Increase | Brookfield Infrastructure Partners (BIP/BIPC)

Dividend | Dividend Growth | Financial Independence | Freedom | Passive Income
Getting a pay raise while sitting on the couch?  Sign me up!  Thanks BIP for another dividend increase!

There's an old Chinese proverb that says "the best time to plant a tree was 20 years ago, the next best time is now".  The reason for this is that it takes time for a tree to grow and prosper and for you to start reaping its benefits.  Dividend growth investing is much the same way.  It takes consistent saving and investing as well as time and patience to let the power of dividend growth take hold.

That's why one of my favorite things is when one of the companies I own decides to pay out more in dividends.  You mean I get a pay raise just for owning a small piece of a company?  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  

On February 2nd the Board of Directors at Brookfield Infrastructure Partners (BIP)(BIPC) approved an increase in the quarterly dividend payment.  The dividend was increased from $0.51 to $0.54 which is an solid 5.9% increase.  Brookfield Infrastructure Partners is a Dividend Challenger with 14 consecutive years of dividend growth.  Shares currently yield 3.59% based on the new annualized payout.

The new dividend will be payable March 31st to shareholders of record as of February 28th.

Since I own 44.662 shares of Brookfield Infrastructure Partners in my Roth IRA, this raise increased my forward 12-month dividends by $5.36.  This is the 3rd raise that I've received from BIP since initiating a position in 2019.  Total organic dividend growth over that time is a 5.9% due to a "cut" in 2020 after the spinoff of Brookfield Infrastructure Partners Corporation (BIPC).

I also own 22.45 shares of BIPC in my Roth IRA and this raise increased my forward dividends for that position by $2.69.

A full screen version of this chart can be found here.

Since BIP initiated a dividend in 2008 there's been 10 rolling 5-year periods with annualized dividend growth ranging from 4.4% to 14.3% with an average of 10.2% and a median of 11.1%.

There's also been 5 rolling 10-year periods with annualized dividend growth ranging from 8.0% to 12.3% with an average of 10.1% and a median of 10.5%.

The 1-, 3-, 5- and 10-year rolling dividend growth rates for Brookfield Infrastructure Partners since 2008 can be found in the following chart.  

A full screen version of this chart can be found here.

For dividend yield theory I consider the fair value range to be the forward dividend yield +/- 10% compared to the 3 year moving average, the under/over value area to be to between 10%-20% deviation from the average and significant over/under value are greater than a 20% deviation from the average.

A full screen version of this chart can be found here.

Brookfield Infrastructure Partners' 3-year average forward dividend yield is 4.38% which corresponds to a share price of $49 based on the new annualized payout.  

I consider the fair value range based on dividend yield theory to be the 3-year moving average yield +/- 10%.  That gives a fair value range of $45 - $55 and suggests that shares are trading above fair value.

Another quick and dirty valuation method is the Gordon Growth or Dividend Discount model.  This valuation method is based solely off the expected future dividends as well as your required return.  Based on a 10% discount rate and assuming Brookfield Infrastructure Partners can maintain 5.5% annual dividend growth shares are worth around $50 per share.

A full screen version of this chart can be found here.

However, reducing the estimated growth rate to 5%, but maintaining the 10% discount rate lowers the fair value to $45.  Maintaining the 5.5% but reducing the discount rate to 9% increases the fair value to $65.

Wrap Up

This raise increased my forward dividends by $8.05 with zero effort on my part.  That's right, absolutely nothing to contribute to their operations.  Based on my Roth IRA's current yield of 2.13% this raise is like I invested an extra $378 in capital.  Except that I didn't!  One of the companies I own just decided to send more cash my way. 

That's how you can eventually reach the crossover point where your dividends received exceed your expenses.  That's DIVIDEND GROWTH INVESTING AT WORK!  The beauty of the dividend growth investing strategy is that you build up your dividends through fresh capital investment as well dividend increases from the companies you own.

This is the 4th and 5th raise that I've received from my Roth IRA holdings increasing my forward 12-month dividends by a combined $34.98.

My FI Portfolio's forward-12 month dividends are $9,659.97  Including my FolioFirst portfolio's forward dividends of $178.88 brings my total taxable accounts dividends to $9,838.85.  My Roth IRA's forward 12-month dividends are $932.04.  My Rollover IRA's forward dividends are $4,045.18.  Across all accounts I can expect to receive $14,816.07 in dividends over the next year.

I've also started compiling dividend data on many of the companies that I own or would like to own.  Brookfield Infrastructure Partners' can be found here which includes the dividend history (as far back as I can find without spending hours hunting it down), rolling dividend growth rates and dividend yield theory.  To see other companies that I've already gathered the data on you can check out the Dividend Companies page.  Check it out and let me know what you think.

Do you own shares of Brookfield Infrastructure Partners?  Do you think they can maintain at least mid single digit dividend growth over the long term?

Please share your thoughts below.