Famed industrialist John D. Rockefeller once quipped to his neighbor that the only thing that gave him pleasure was to see his dividends coming in. If you're like Mr. Rockefeller and enjoy seeing dividend payments drop into your brokerage account, then I bet you'll probably love Brookfield Renewable Partners (BEP -1.58%), W.P. Carey (WPC -0.37%), and Magellan Midstream Partners (MMP). Not only does this trio pay well above-average dividends, but each should continue growing those payouts for the foreseeable future.
The definition of a cash flow stream
Brookfield Renewable Partners owns one of the largest renewable power businesses in the world. Overall, the company operates 261 generating facilities in North and South America, as well as Europe, with 85% of its portfolio comprised of hydroelectric plants. What makes that collection worth noting for dividend seekers is that the company secured long-term power purchase agreements for 94% of the electricity these facilities generate. Those contracts provide the company with a stable revenue stream to send back to investors.
Brookfield Renewable targets sending about 70% of that cash back to investors each year in support of its 5.5%-yielding distribution. It reinvests the rest back into building new hydro and wind assets, which when combined with the embedded growth of its existing portfolio should generate 6% to 11% annual growth in the company's funds from operations (FFO). That growing cash flow stream should support 5% to 9% annual distribution growth, enabling Brookfield to continue growing its payout, which it has done each year since going public in 2012.
The "rent checks" should keep rolling in
W.P. Carey owns one of the largest portfolios of net-lease real estate properties in the world, which are those secured by a single tenant responsible for most of the building's operating expenses. Overall, the company holds 890 properties that are 99.8% occupied by tenants signed to leases that have a weighted average remaining lease term of nine and a half years. That portfolio suggests the company should continue collecting steady rent checks for years to come.
Meanwhile, W.P. Carey sends about 75% of that cash flow back to investors each year via a dividend that currently yields 5.7%. The company uses the cash that remains and its balance sheet strength to build and buy additional properties that help increase its cash flow stream. That business model has enabled W.P. Carey to raise its dividend for 19 straight years -- a trend that should continue for many more.
Fueled up and ready to keep growing
Magellan Midstream Partners operates the longest refined products pipeline system in the country, which ensures that our economy has a steady supply of gasoline and other fuels to meet its needs. What's worth noting about this system and many of the company's other assets is that they generate fairly predictable cash flow from fee-based contracts and other agreements, which currently support about 90% of its earnings. That provides Magellan with steady cash flow to fund its 5.3%-yielding distribution to investors. Meanwhile, the company covers that lucrative payout with cash by 1.2 times, leaving it with a nice cushion and money to help finance expansion projects.
Magellan has $1.75 billion of growth projects under construction through 2019, which should provide it with the cash to boost its distribution by 8% next year, continuing the trend of steady increases since 2001. Meanwhile, with its current growth project backlog stretching through 2019 and another $500 million of potential projects currently under evaluation, Magellan should have the fuel to keep its distribution growth streak going for at least the next few years.
Great income now and even more to come
What makes this trio a great option for income investors to consider is that each generates very predictable cash flow, which provides a strong support system for their lucrative dividends. Furthermore, these companies willingly hold back a portion of that cash flow to give themselves both a margin of safety and money to finance expansion opportunities that will grow earnings, enabling the payouts to follow suit. That trend doesn't appear to be nearing an end, which is why dividend seekers should take a closer look at this trio.