I'm a big fan of dividend stocks. While I don't specifically need the income right now, I like the optionality it provides. On top of that, high-quality dividend payers tend to outperform their more-stingy peers over the long term.
Because of those factors, I'm always adding stocks to my income portfolio. Three companies that currently sit at the top of my buy list are Atlantica Yield (AY -0.70%), Enterprise Products Partners (EPD -0.21%), and Public Storage (PSA 0.34%). Here's why I'd have no problem buying any one of them right now.
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A sustainable income stream
Atlantic Yield currently yields a well-above-average 5.5%. Powering that payout is the cash flow from its diversified portfolio of sustainable infrastructure, including renewable energy and natural gas generating facilities, power lines, and water desalination plants. Long-term, fixed-rate contracts underpin these assets, enabling Atlantica to produce predictable cash flow.
The company has done a solid job of growing its payout since hitting the reset button in 2016. It has increased the dividend 11 times during that period, and by 68% overall. It should have plenty of room to continue growing its payout. It recently formed a renewable energy joint venture in Chile and is buying out a partner for a U.S. solar energy generating facility. It also raised nearly $500 million in financing to support these and future investment opportunities. That combination of growth and yield from a company focused on sustainable infrastructure makes it an ideal long-term holding in my portfolio, which is why I'd have no problem adding more shares.
Plenty of fuel to keep growing the payout
Midstream giant Enterprise Products Partners currently yields an enticing 9.4%. While payouts approaching double digits are usually a warning sign, that's not the case here. For starters, the company generates resilient cash flow -- a quality that was on full display during the turbulent second quarter. While its cash flow dipped slightly, Enterprise produced enough to cover its payout by a comfortable 1.6 times. That enabled it to retain some money to fund capital projects. Meanwhile, it compliments that already solid profile with one of the strongest balance sheets in the midstream sector.
The company's fiscal conservatism has served it well over the years as it has consistently grown its cash flow and dividend payout -- it has increased the latter for more than 20 consecutive years. Despite all the turmoil in the energy market, Enterprise Products Partners appears poised to continue that pattern, fueled by its expansion program and top-tier balance sheet. Because of that, I plan to continue adding to my position in it when I have available cash.
A highly resilient dividend
Self-storage REIT Public Storage currently yields about 4%. The company backs that payout with top-notch financial metrics. Topping the list is that Public Storage has one of the highest credit ratings in its sector, backed by an ultra-low leverage ratio and lots of cash. The REIT also generates lots of steady cash flow and has kept its dividend payout ratio at a conservative level. (It was less than 80% during the first half of 2020.)
The durability of the company's cash flow was apparent this year, when it dipped by only 2.7% despite all the turbulence caused by COVID-19. The biggest issue wasn't rental income, which only slipped 0.2% but a big reduction in late charges and administrative fees. While the company wrote off some of those to help customers during the pandemic, it also billed fewer of those fees because customers had cash to pay their bills on time thanks to government stimulus programs.
Meanwhile, because of its strong balance sheet, the REIT has the flexibility to continue building and buying new self-storage facilities. Those future investments -- which currently tally $403 million on the development side -- will grow its cash flow to provide further support for its high-yielding dividend.
Durable dividends for today's turbulent market
Atlantica Yield, Enterprise Products Partners, and Public Storage have everything I like to see in a dividend stock. They each pay above-average yields that they back with solid financial profiles, which gives them the flexibility to continue expanding their operations. That provides them with the cushion to continue paying their dividends during tough times like this year, and also gives them room to keep growing. Because of those factors, I'd buy more shares of any one of them right now.
