My Highest Conviction High-Yield Dividend Stock to Buy in December

I own dozens of stocks that currently pay high-yielding dividends. They're core to my strategy for generating passive income, which I view as my ticket to achieving financial independence. I have high conviction that each one can continue to produce a growing stream of dividend income for my portfolio.

However, my highest conviction position is Brookfield Infrastructure Partners (NYSE: BIP). I believe that it has the potential to produce the highest total returns (dividend income plus stock price appreciation) among my income stocks over the next five years. Here's what drives my view.

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A very bankable high-yielding payout

Brookfield Infrastructure Partners currently yields 5%, which is meaningfully higher than the S&P 500's 1.1% yield and the 3.7% yield of its economically equivalent corporate twin, Brookfield Infrastructure Corporation (NYSE: BIPC). While the limited partnership sends a Schedule K-1 Federal Tax Form each year instead of the Form 1099-Div the corporation provides, I think the extra paperwork is well worth the additional income.

Both entities cover their high-yielding payouts with ease. Brookfield generates very stable cash flow, with 85% of its annual funds from operations (FFO) backed by long-term contracts and government-regulated frameworks. Meanwhile, it has a conservative dividend payout ratio, which it expects to be around 67% this year, well within its target range of 60%-70%. That provides it with a comfortable cushion while enabling it to retain some cash to fund its expansion initiatives.

Brookfield also has a strong balance sheet. It has a solid investment-grade credit rating (BBB+) and a healthy liquidity level that it routinely refreshes through its capital recycling strategy.

Multiple growth drivers

While I love Brookfield Infrastructure Partners' rock-solid, high-yielding dividend, it's far from the company's only draw. It's also growing at an above-average rate. Brookfield Infrastructure has grown its FFO per share at a 10% compound annual rate over the last five years and at a 14% compound annual rate since inception (2009).

It's in a strong position to deliver growth toward its historical 14% average in the future, easily supporting its plans to increase its high-yielding payout by 5% to 9% per year. It has grown briskly over the past five years, despite headwinds from a prolonged period of a strong U.S. dollar and higher borrowing costs due to higher interest rates. Those headwinds could shift into tailwinds in the coming years as interest rates fall and the dollar potentially weakens.

Meanwhile, the company expects to deliver robust organic growth from continued inflationary-driven contract rate increases, volume growth as the global economy expands, and its burgeoning backlog of organic growth capital projects. The company currently has nearly $8 billion of expansions underway, which it expects to complete over the next two to three years. Projects include its investment in two U.S. semiconductor fabrication facilities and multiple data center development projects worldwide.

Brookfield also routinely makes acquisitions as part of its capital recycling strategy. The company has secured $1.5 billion of new investments this year, including a U.S. refined products system, a U.S. bulk fiber network, and a North American railcar network. These latest additions to its portfolio will contribute incremental cash flow as it closes these deals over the next few quarters.

Brookfield also sees significant investment potential for investing in AI data centers and related infrastructure. It has already secured a $140 million investment in an AI power project, the first of many in a strategic investment partnership with Bloom Energy.

An incredible value

Despite its continued healthy growth rate, units of Brookfield Infrastructure have underperformed over the past year. They're up less than 3% to around $35 per share. That compares to a nearly 10% rally in the corporate share price (which is now over $46 per share) and a more than 12% rise in the S&P 500.

With its FFO on track to rise over 6% this year to $3.32 per share, Brookfield Infrastructure Partners trades at 10.5 times FFO, cheaper than its corporate twin (13.9 times FFO) and the broader market index (25.5 times earnings). Given that its already above-average growth rate appears poised to accelerate in 2026 and beyond, Brookfield Infrastructure Partners looks like an incredible value these days.

A high conviction, high-yield stock

Brookfield Infrastructure Partners pays a very bankable, high-yielding dividend backed by stable cash flows and a rock-solid financial profile. On top of that, the company anticipates that its already above-average earnings growth rate will accelerate in the coming years. Add in its dirt cheap valuation, and I have a very high conviction that Brookfield Infrastructure Partners can deliver a growing income stream along with market-beating total returns in the coming years.

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.