2 High-Yield Dividend Stocks I Can't Stop Buying

I love to collect dividend income. It provides me with more cash to invest each month and a growing level of financial freedom. My goal is to eventually generate enough passive income from dividends and other sources to cover my basic living expenses.

To support my income strategy, I focus on buying high-yielding dividend stocks. Two companies in particular, Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP) and W.P. Carey (NYSE: WPC), have consistently stood out. Here's why I can't stop buying these income stocks.

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A high-octane dividend growth stock

Brookfield Infrastructure currently yields nearly 4%, more than triple the S&P 500's dividend yield (1.2%). The global infrastructure operator supports its high-yielding payout with very stable cash flows. Long-term contracts and government-regulated rate structures account for around 85% of its annual funds from operations (FFO). Most of those frameworks have no volume or price exposure (75%), while another large portion of its cash flow (20%) comes from rate-regulated structures that only have volume exposure tied to changes in the global economy. The bulk of these arrangements also either index its FFO to inflation (70%) or protect it from the impact of inflation (15%).

The company pays out 60% to 70% of its very resilient cash flow in dividends. That gives it a comfortable cushion while allowing it to retain a meaningful amount of cash to invest in expansion projects. Brookfield also has a strong investment-grade balance sheet. Additionally, the company routinely recycles capital by selling mature assets to invest in higher-returning opportunities.

Brookfield has grown its FFO per share at a 14% annual rate since its inception in 2008, supporting a 9% compound annual dividend growth rate. While its growth has slowed in recent years due to headwinds from interest rates and foreign exchange fluctuations, a reacceleration appears to be ahead. The company believes that a combination of organic growth driven by inflationary rate increases, volume growth as the economy expands, and expansion projects will drive robust FFO per share growth in the coming years. Additionally, it expects to get a boost from its value-enhancing capital recycling strategy. These catalysts should combine to drive more than 10% annual FFO per share growth.

The company's strong financial profile and robust growth prospects easily support its plan to increase its high-yielding payout at a 5% to 9% annual rate. Brookfield has increased its payout in all 16 years since it went public.

Rebuilt on an even stronger foundation

W.P. Carey has a 5.4% dividend yield. The real estate investment trust (REIT) owns a well-diversified portfolio of operationally critical real estate across North America and Europe. It focuses on investing in single-tenant industrial, warehouse, retail, and other properties secured by long-term net leases featuring built-in rental escalation clauses. Those leases provide it with very stable and steadily rising rental income.

The REIT has spent the past few years reshaping its portfolio. It accelerated its exit from the office sector in late 2023 by spinning off and selling its remaining properties. W.P. Carey has also been selling off some of its self-storage properties, particularly those not secured by net leases. It has been recycling that capital into properties with better long-term demand drivers, such as industrial real estate.

W.P. Carey's strategy should enable it to grow its adjusted FFO at a higher rate in the future. Its portfolio is delivering healthy same-store rent growth (2.3% year-over-year in the second quarter). Meanwhile, its investments to expand its portfolio are driving incremental FFO per share growth. W.P. Carey is on track to grow its adjusted FFO per share by 4.5% at the mid-point of its guidance range this year.

That growing income is allowing the REIT to increase its dividend. It has raised its payment every quarter since resetting the payout level in late 2023 when it exited the office sector, including a 4% increase over the past 12 months. With a strong portfolio and balance sheet, W.P. Carey has the financial flexibility to continue growing its portfolio, FFO, and dividend in the coming years.

High-quality, high-yielding dividend stocks

Brookfield Infrastructure and W.P. Carey stand out for their stable and growing cash flows, as well as high-yield dividends. Brookfield offers inflation-protected cash flows that minimize risk, while W.P. Carey generates reliable rental income from long-term leases. With lots of income and growth ahead, I just can't stop buying these high-quality, high-yielding dividend stocks.

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