If you bank on stocks that pay you regularly to boost your income, you're not alone. Dividend stocks have traditionally outperformed non-dividend-paying ones, and if chosen prudently, they can help you build great wealth over time.
This journey to watching your money grow gets even more exciting if the dividend paychecks keep getting fatter from time to time. That's possible if you invest in dividend growth stocks such as Brookfield Infrastructure Partners (BIP 2.21%) and NextEra Energy Inc (NEE 1.57%). Both these stocks could easily fetch you double-digit returns annually.
Excited? Read on to learn more.
Minting money from infrastructure
Brookfield Infrastructure Partners' core business and structure makes it an intriguing dividend play. What this company essentially does is acquire high-quality distressed assets globally in critical essential services sectors such as utilities, energy, transportation, communications, and renewable energy, and then convert them into cash-flow-generating machines. Later, it may sell mature low-growth assets to reinvest capital opportunistically.
Image source: Getty Images
Because businesses such as electricity, toll roads, and telecommunications are mostly either regulated or contracted, they can bring in stable cash flows for Brookfield Infrastructure. Combined with a hugely diversified portfolio and a solid global footprint, Brookfield Infrastructure has been able to grow its funds from operations and dividends by double digits since 2009, also its first full year of operations.
Image source: Brookfield Infrastructure
If you're wondering where those dividends are headed, consider that Brookfield recently reported a 20% year-over-year jump in its funds from operations for the six months ended June 30, 2017. The company's clearly on a strong growth trajectory, and its intensified focus in high-growth regions such as India and Brazil should keep the momentum going. For example, Brookfield recently bid for more than 10,000 telecom towers in India worth around $1 billion.
Given the backdrop, shareholders in Brookfield have every reason to remain excited. With management targeting a funds-from-operations payout of 60% to 70% and annual dividend growth of 5%-9% in the long run, and with the stock yielding 4% currently, income investors can expect solid future returns from Brookfield Infrastructure.
This renewable-energy play loves to pay dividends
My next dividend pick is a utility, NextEra Energy, which shouldn't really surprise you. Utilities are known for their income-generating capabilities, thanks to their low volatility and the resilient nature of their businesses that involve supplying essentials such as electricity and gas.
NextEra Energy, however, goes beyond a traditional utility -- it's the company's foothold in the renewable-energy space that excites me. You may be surprised to know that NextEra Energy is the world's largest producer of solar and wind energy and among the largest U.S. nuclear power companies. That already puts NextEra Energy ahead of the pack in the race toward clean energy, which is a huge competitive advantage to have in the long run.
When you also have a visionary management backing a company with such solid growth potential, you know you have a valid reason to be bullish. Earlier this year, NextEra Energy's management projected adjusted EPS to grow at an annual compounded average clip of 6%-8% between 2016 and 2020, and it even gave out an estimate for 2020 adjusted earnings to be between $7.85 and $8.45 per share.
Have a look at why the company's guidance should make any income investor sit up and take notice:
Image source: NextEra Energy
NextEra Energy's dividends have grown in line with its adjusted EPS in the past. Assuming the trend continues, your total returns from NextEra Energy could easily hit the double-digit mark in the coming years, even at a conservative yield estimate of 2% -- the stock currently yields 2.6%. As for its financial goals, it's unlikely the company will miss any, for one simple reason: the incredible mix of stability (a regulated utility) and growth (a clean-energy business) that characterizes its portfolio.
