Top Dividend Stocks to Consider During Market Sell-Offs

Stock market downturns, like the one we've seen this year, can offer significant opportunities for dividend investors. When stock prices decrease, dividend yields increase. This means that buying high-quality dividend stocks during these sell-offs can lead to a more rewarding income stream.

Two notable dividend stocks that have recently dropped in price are Realty Income (O) and Brookfield Infrastructure (BIPC 0.72%) (BIP -0.69%). Both stocks have experienced declines of more than 12% from their highest points over the past year. Here’s why investors focused on dividends might regret not considering these stocks during the current downturn.

Realty Income: A Premium Investment Opportunity

Shares of Realty Income have dropped more than 12% from their peak price, pushing the real estate investment trust's (REIT) dividend yield to an attractive 5.7%. This yield is compelling for a stock with such a strong reputation for consistent payouts.

The decline in Realty Income's stock price has made its valuation more appealing. In the previous year, the REIT reported adjusted funds from operations (FFO) of $4.19 per share. At a stock price around $57, it now trades at roughly 13.5 times its FFO, which is lower than many comparable REITs that trade above 15 times their FFO.

Realty Income has a stellar dividend history. It has increased its dividend payouts an impressive 130 times since it first went public 30 years ago. The company boasts a dividend increase streak of 30 years and has achieved 110 consecutive quarters of higher dividends. Over the last three decades, Realty Income has grown its payouts at a compound annual growth rate of 4.3%.

Looking ahead, Realty Income is well-positioned to continue growing its dividend. The REIT has one of the strongest financial profiles in its sector, supported by a superior bond rating. It is among only eight REITs with a credit rating of A3/A- or better, granting it favorable access to low-cost capital for further investments in income-generating properties.

Additionally, Realty Income has substantial growth opportunities. The company estimates that the total market for net lease real estate investments in the U.S. is around $5.4 trillion, alongside another $8.5 trillion available in Europe. With $58 billion invested across properties in eight countries, Realty Income has a significant growth trajectory ahead, which should support ongoing dividend increases.

Brookfield Infrastructure: A Hidden Gem

Shares of Brookfield Infrastructure have faced even sharper declines, falling over 21% from their recent highs, which has elevated its dividend yield to an appealing 4.9%.

This global infrastructure powerhouse has consistently increased its dividend since its inception 16 years ago, achieving a compound annual growth rate of 9% in its payouts during this time.

Looking forward, Brookfield is targeting an annual dividend growth of 5% to 9%. The company has impressive growth prospects, anticipating that the global infrastructure sector will require a massive $100 trillion in investments over the next 15 years for maintenance, development, and construction. Such demand offers substantial opportunities for expansion. Presently, Brookfield is working on $8 billion worth of expansion projects along with another $4 billion worth in the development stages.

In addition to capital projects, Brookfield also benefits from inflation-related rate adjustments, increasing volume as the global economy recovers, and strategic acquisitions. The company projects that these growth drivers will lead to over 10% annual growth in its FFO per share in the near future.

Investors can access this growth and stable income at an attractive valuation following Brookfield's stock price drop. Last year, the company was able to generate $3.12 in FFO per share. With its recent stock price around $35, Brookfield trades at just over 11 times its FFO, a bargain compared to many stocks, especially when the S&P 500 is valued at more than 20 times earnings. Given its strong growth potential, Brookfield is likely undervalued.

Conclusion: Quality Stocks at Great Prices

The recent market sell-offs of Realty Income and Brookfield Infrastructure have reduced their valuations while enhancing their dividend yields. These stocks present compelling investment opportunities right now, as their consistent dividend growth suggests strong total return potential in the long run. Failing to take advantage of this market dip to acquire shares could lead to regret.

dividend, stocks, investment