Key Points
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Shares of Brookfield Infrastructure and Novo Nordisk offer an average yield that is more than triple the market average.
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Novo Nordisk lowered its forward outlook in response to a problem that has most likely been resolved already.
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Brookfield Infrastructure’s pipelines and data centers aren’t particularly thrilling, but they do generate predictable cash flows.
Despite a recent dip in response to unfavorable economic data, the stock market’s bull run seems unstoppable. From April 4 through Aug. 8, the S&P 500 index shot up a whopping 25.9%.
For dividend-seeking investors, a buoyant stock market can be a little annoying. Stock prices rising faster than profits means most dividend payers offer unattractive yields. The average yield from dividend payers in the benchmark S&P 500 index is an unattractive 1.2% at recent prices.
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Most dividend yields aren’t particularly desirable right now, but there are still some underappreciated gems hiding in plain sight. Novo Nordisk(NYSE: NVO) and Brookfield Infrastructure(NYSE: BIP)(NYSE: BIPC) offer an average yield of 3.9% at recent prices. Plus, they could raise their payouts at a mid-single-digit percentage, or better, every year from now until you want to retire.
You don’t have to be wealthy to put your money to work with these stocks. At recent prices, $100 is enough to buy a share of both. Here’s why that looks like a great idea for folks who would like to grow their passive income streams.
Image source: Getty Images.
Novo Nordisk
From the end of 2023 through Aug. 7, shares of Novo Nordisk lost more than half their value. Earnings reported by the Denmark-headquartered company that markets Ozempic and Wegovy have performed much better than the stock.
If we ignore currency exchange rates, U.S. investors who buy the stock at recent prices would receive a 3.44% yield if Novo Nordisk holds the payout flat. Holding dividend payments steady isn’t in this company’s nature. From 2020 through 2024, it raised annualized dividend payments by 120% in its native currency.
Shares of this drugmaker have been under intense pressure since management lowered its sales outlook for 2025. On Aug. 6, the company told investors to expect revenue to rise between 8% and 14% this year. That’s much slower than the 13% to 21% range management provided in May.
On the bottom line, management lowered its operating earnings growth outlook to a range of between 10% and 16% this year. This is a slower rate of growth than we had been expecting, but it’s still pretty good for an established pharmaceutical business.
Shares of Novo Nordisk have been beaten down to just 14.1 times trailing earnings. This valuation implies growth at a low single-digit percentage over the long run. I’d argue that profit growth of around 10% annually seems far more likely.
During its initial launch, Novo Nordisk failed to produce enough Wegovy to meet demand, which allowed independent compounding pharmacies to fill in the gap. The Food and Drug Administration declared an end to the Wegovy shortage in February. Compounding pharmacies that have been fighting the decision in U.S. courts without success are a headwind that seems likely to subside.
Brookfield Infrastructure
Even if you haven’t heard of Brookfield Infrastructure, there’s a good chance your employer relies on at least one of its assets. This subsidiary of Brookfield Asset Management owns and operates critical infrastructure networks that facilitate the flow of freight, passengers, data, water, and energy.
Shares of Brookfield Infrastructure have fallen by about 15% over the past three years, but its dividend payout has risen by 18.5% over the same time frame. At recent prices, the stock offers an unusually large 4.3% dividend yield.
Investing in pipelines, fiber optic cables, railways, data centers, toll roads, and telecom towers receives significantly less attention than big tech’s investments in artificial intelligence (AI). I’d argue that this is one of the safest AI stocks you can buy now. Nobody knows which large language models will become the most popular over the long run, but we can be sure they will require heaps of energy and data transmission. Brookfield Infrastructure’s portfolio includes assets that provide both.
During the second quarter, Brookfield Infrastructure reported funds from operations (FFO), a proxy for earnings used to evaluate asset-heavy businesses, that rose 5% year over year to $0.81 per share. This is heaps more than it needs to meet a quarterly dividend payout currently set at $0.43 per share and raise it much further. Adding some shares to a diversified portfolio looks like a nearly surefire way to generate heaps of dividend income over the long run.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Infrastructure Partners and Novo Nordisk. The Motley Fool has a disclosure policy.