More than 4,000 stocks that trade on U.S. stock exchanges pay dividends. Not all of them necessarily pay mouthwatering dividends, though. And many of them aren't ones that you'd want to buy.
However, there are some dividend stocks that I'd buy right now without hesitation. Here's why AbbVie (ABBV 1.06%), Brookfield Infrastructure Partners (BIP 3.35%), and Brookfield Renewable Partners (BEP 0.92%) are at the top of my list.
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1. AbbVie
How does a dividend yield of 5.8% sound to you? That's what AbbVie currently offers. Even better, the big pharmaceutical company boasts an impressive track record of dividend hikes -- 47 consecutive years and counting.
I'd argue that AbbVie also qualifies as a bona fide bargain right now. The stock is still down by a double-digit percentage from its highs earlier this year due to the market sell-off resulting from the COVID-19 outbreak. But the drugmaker's business shouldn't be terribly impacted by the pandemic. Its shares trade at well under nine times expected earnings. That's dirt cheap.
One reason why AbbVie is priced so low is that it faces biosimilar competition for its top-selling drug, Humira, in Europe with rivals scheduled to enter the U.S. market in 2023. However, there's a bigger picture for AbbVie that I think some are missing.
The company has already launched two new immunology drugs, Rinvoq and Skyrizi, that will take the baton from Humira and go a long way toward offsetting sales declines for the blockbuster drug. AbbVie also has several other drugs that will help, notably including cancer drugs Imbruvica and Venclexta. In addition, the company should close on its acquisition of Allergan this year, a deal that will make it less dependent on Humira.
AbbVie might not be a tremendous growth story for now, but it's valued attractively and has a juicy dividend. That's enough to make it a top stock to consider for income-seeking investors.
2. Brookfield Infrastructure Partners
Brookfield Infrastructure Partners' distribution (the equivalent to a dividend for a limited partnership) currently yields close to 5.7%. The company hasn't been in business long enough to claim a streak of dividend increases like AbbVie has. However, Brookfield Infrastructure has nearly tripled its distribution payout over the last 10 years, which is a remarkable achievement.
But as juicy as Brookfield Infrastructure's distribution is, there's a lot more to like about the stock. For one thing, the company has a stable business model. Around 95% of Brookfield Infrastructure's cash flow is either regulated or contracted. That means the company can count on money coming in the door month in and month out.
Its diversification adds to the stability. Brookfield Infrastructure owns infrastructure assets across multiple sectors -- data, energy, transport, and utilities. Less than one-third of the company's total cash flow comes from a single sector. It's also diversified geographically, with no more than 30% of cash flow generated in a single region.
As an added bonus, Brookfield Infrastructure has solid growth prospects. The company expects to increase funds from operations (FFO) by between 6% and 9% over the long run. That level of growth combined with its attractive distribution put the infrastructure stock in the top tier of dividend stocks, in my view.
3. Brookfield Renewable Partners
It's not a mere coincidence that Brookfield Renewable Partners has a name very similar to Brookfield Infrastructure Partners. The general partner of both companies is a subsidiary of Brookfield Asset Management. Like its infrastructure-focused sibling, Brookfield Renewable offers a great distribution with a current yield of 4.9%.
With uncertainties in the economy as a result of the COVID-19 pandemic, I like that Brookfield Renewable has maintained the lowest-risk balance sheet in the renewable energy sector. The company has plenty of liquidity to survive and thrive during an economic downturn.
I also like Brookfield Renewable's relative diversification. The company has significant operations in hydroelectric, solar, and wind electricity generation as well as a sizable storage capacity. It also operates globally, with renewable energy facilities in Asia, Europe, North America, and South America.
But what I most like about this stock is its potential to deliver market-beating total returns. Brookfield Renewable targets a total return of 12% to 15%, with around 5% coming from its distribution yield and another 10% coming from cash flow growth. With the use of renewable energy sources almost certain to increase dramatically over the next decade and beyond, Brookfield Renewable is probably one of the most future-proof stocks on the market.
