This year has been a tough one for dividend investors. More than 175 public companies have reduced their dividend by at least 50%, with many of them suspending their payout. They made these moves to preserve cash so that they can survive the current challenging economic conditions in the fallout of the COVID-19 outbreak.
However, not all dividend stocks are cutting their payouts these days. Several expect to keep growing them despite the current market conditions. Five of these dividend standouts are water utility American Water Works (AWK 0.98%), infrastructure operator Brookfield Infrastructure (BIP -3.01%) (BIPC -3.97%), electric utility NextEra Energy (NEE 0.04%), industrial REIT Prologis (PLD 0.30%), and pipeline giant TC Energy (TRP 0.21%). Given the resilience of their dividends, I'd buy any one of them right now.
Stable cash flow backs this dividend growth strategy
American Water Works has delivered high-end dividend growth over the last six years, increasing its payout at a 10.4% compound annual rate. It expects that trend to continue, targeting dividend growth at the high end of its 7% to 10% yearly range through 2024. It has already delivered on that pledge this year because it recently provided investors with another 10% increase, boosting its dividend yield to around 2%. That payout is rock solid given the company's stable rate-regulated revenue, conservative payout ratio target of 50% to 60% of its cash flow, and top-notch credit profile, which includes one of the highest credit ratings in the utility sector.
A durable dividend
Brookfield Infrastructure has grown its dividend -- which currently yields around 5% -- at least once per year for more than a decade. The current level is on a firm foundation since Brookfield generates stable cash flow backed by regulated rates at its utilities and long-term, fixed-rate contracts at most of its other operations. It further supports its dividend with a strong investment-grade balance sheet and a conservative dividend payout ratio of less than 70% of its cash flow. That's why Brookfield Infrastructure believes it can continue increasing its payout at a 5% to 9% annual rate over the long term.
High-powered dividend growth
NextEra Energy also has a long history of growing its dividend, which it expects will continue in the coming years. In its view, it can increase its payout by about 10% per year through at least 2022. Powering that view is the stability of its cash flow, its conservative 60% payout ratio, and one of the strongest credit ratings in the utility space. Those factors provide it with the financial flexibility to invest in opportunities that grow its earnings, supporting its dividend growth plan.
Delivering dividend growth
Prologis has also done an excellent job of growing its payout at an above-average pace. Over the past five years, the company has increased it at an 11% compound annual rate, which is above the average pace of other logistics REITs and the broader market. The company expects to continue growing its payout -- which currently yields around 2.4% -- as it expands its logistics footprint. Further supporting that view is its top-notch balance sheet and a relatively low payout ratio of about 65% of its cash flow.
A fully fueled dividend growth strategy
TC Energy has an elite history of increasing its payout. The Canadian pipeline giant has boosted its dividend annually for the last 20 years, growing it at a more than 7% compound annual pace. It expects that trend to continue for the foreseeable future. In its view, it can boost its payout -- which currently yields 5.5% -- by 8% to 10% next year and then at a 5% to 7% yearly pace after 2021. Fueling that outlook is a massive backlog of expansion projects, a low 40% dividend payout ratio, and one of the strongest credit ratings in the pipeline sector.
Rock-solid options for any income portfolio
These five companies have a long history of delivering consistent dividend increases. Even better, each one expects to continue growing their payouts in the future despite the current market turmoil. That's because they all generate relatively stable revenue backed by government-regulated rates or long-term, fixed-fee contracts, have conservative payout ratios for their sector, and top-tier balance sheets. That gives them the financial flexibility to grow their operations and stable cash flows, which supports their ability to increase their dividends even during challenging market conditions. It would have no problem buying any one of them these days.