2 stocks to buy with dividends above 3%
The dividend yield on the S&P 500 is currently near a 20-year low of around 1.3%. This is due to a series of factors, including the rise in stock prices, the decline dividend payments last year due to the pandemic, and a preference of certain sectors for share buybacks on dividends.
However, while these factors make it more difficult for income-seeking investors to find an attractive return, they do exist. Two dividend-paying stocks that currently stand out are Brookfield Renewable Power (NYSE: BEP)(NYSE: BEPC) and Real estate income (NYSE: O). Both return more than 3%, more than double that of the average S&P 500 company.
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A constantly growing stream of dividends
Brookfield Renewable is one of the largest in the world renewable energy companies. It is a world leader in hydropower and wind power and the solar energy platforms. Brookfield sells the electricity it produces under long-term, fixed-rate power purchase agreements, which allows it to generate a constant cash flow. It uses part of these funds to support its dividend of 3.2%.
One thing that sets Brookfield apart from other higher performing companies is its growth profile. The company estimates that it could increase its cash flow per share by up to 20% per year through 2025. This is a potential acceleration from the last decade when Brookfield increased its cash flow per share at an annual compound rate of more than 10%. Several factors are fueling this brighter outlook, including higher electricity prices, a large portfolio of renewable energy development projects and acquisitions.
This forecast should give Brookfield a lot of leverage to continue increasing its dividend. He expects to be able to increase his payment by 5-9% per year. This is potentially faster than the compound annual growth of over 6% it has recorded since 2010. This likelihood of generating a steadily growing revenue stream fueled by the energy transition to cleaner sources makes Brookfield an excellent one. option for dividend investors. It should produce compelling income as well as total returns.
Living up to its name
Realty Income has been an outstanding dividend stock over the years. The property investment fund (REIT) made 615 consecutive monthly dividend payments throughout its more than 50 year operating history. During that time, he has increased his payout 112 times since his initial public offering in 1994, including in each of the last 96 consecutive quarters.
The REIT has paid reliable dividends by owning high quality commercial real estate backed by a strong financial profile. It focuses on independent properties (primarily retail) triple net leased to creditworthy tenants in relatively resilient industries. These leases oblige the tenant to cover the maintenance, property taxes and insurance of the building. This means that Realty Income is generating very stable rental income to support its 4.2% dividend.
Realty Income also has one of the strongest balance sheets in the REIT industry. It is one of the few REITs with an A credit rating, and it has a reasonably conservative value. dividend payout rate. These factors give it the financial flexibility to make acquisitions that expand its portfolio and cash flow to continue to grow the dividend.
The REIT is on track to purchase $ 4.5 billion worth of properties this year. On top of that, it merges with another REIT TRUTH (NYSE: VER) in an all-equity transaction that will create a top five global REIT. This merger is expected to increase its annualized cash flow per share by more than 10%. As a result of this growth, Realty Income is expected to continue living up to its name by providing investors with an ever-increasing passive income stream backed by commercial real estate.
Two exceptional options for dividend investors
Brookfield Renewable and Realty Income offers investors attractive returns in today’s market. In addition, both companies should be able to continue to increase their payments in the years to come. This makes them ideal investments as they are expected to generate passive income as well as price appreciation.
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Matthew DiLallo owns shares of Brookfield Renewable Corporation Inc. and Brookfield Renewable Partners LP The Motley Fool has no position in the mentioned shares. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.