This year hasn't been a good one for dividend stocks. Hundreds of companies have slashed or suspended their payouts to preserve cash during the COVID-19 outbreak. Because of that, income investors have fewer appealing options.
However, one of the positives of this year's economic upheaval is that it shined a spotlight on companies with the most resilient dividends. Their ability to endure the turbulence makes them stand out. Three stocks that have proven the durability of their payouts are infrastructure-giant Brookfield Infrastructure (BIP -0.80%) (BIPC -1.04%), renewable energy Clearway Energy (CWEN 0.26%) (CWEN.A 0.28%), and industrial REIT Duke Realty (DRE).
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Headwinds are becoming tailwinds
The durability of Brookfield Infrastructure's business model has been on full display this year. While headwinds from foreign-exchange fluctuations and economic shutdowns impacted its operations, the company still expects its cash flow per share to rise this year.
Driving that growth is its organic-expansion projects and recently completed acquisitions. When combined with the company's top-notch balance sheet, that stability amid the storm puts its 4%-yielding dividend on a firm foundation.
Meanwhile, Brookfield Infrastructure anticipates that this year's headwinds will fade in 2021. Because of that, Brookfield believes 2021 will be a monster year, as it expects its volumes to improve and foreign-exchange rates to normalize. The company will also continue benefiting from organic growth and acquisitions. That suggests it should have plenty of fuel to continue increasing its dividend, which it has done every year for the past decade.
A supercharged payout with plenty of fuel to keep growth
Instead of cutting its dividend this year, Clearway Energy has increased its payout twice, including a monster 49% boost in August after one of its largest customers emerged from bankruptcy, freeing up the associated cash flows. With that uncertainty gone and the rest of its clean energy assets generating steady cash, Clearway's 4.3%-yielding payout is on an increasingly sustainable footing.
Meanwhile, this year's dividend growth is only the beginning, as Clearway Energy is targeting dividend increases of 5% to 8% per year. It expects to deliver high-end dividend growth next year after lining up several investment opportunities this year.
On top of that, it has increasing clarity on its longer-term growth prospects, thanks to its relationships with a renewable energy project development company and a leading global private equity fund manager. Because of that, Clearway expects its payout to keep growing, which should give it the power to generate attractive total annual returns.
High-demand real estate
COVID-19 has accelerated the shift toward e-commerce. Because of that, companies need more logistics space to handle the increase in online sales. That trend has been a boon to industrial REITs like Duke Realty. Not only are the vast majority of its tenants paying rent, but it's also seeing increasing interest in its properties and development projects. Because of that and its strong credit rating, Duke Realty hasn't had any problems maintaining its 2.4%-yielding dividend.
Meanwhile, the company has an extensive development pipeline that should enable it to continue growing its cash flow and dividend. Duke Realty's development projects currently represent 8% of its total assets, double that of its closest peer. Further, it has pre-leased 65% of this space, which is well ahead of its peer group's pace.
Because of that, it has lots of visibility into its growth prospects and is expecting mid-to-high single-digit cash flow and dividend growth over the next few years. That forecast suggests Duke should have the ability to generate strong total returns.
Above-average income streams with lots of upside
Brookfield Infrastructure, Clearway Energy, and Duke Realty all offer dividend investors above-average yields that have proven their durability this year. Even better, all three payouts should head higher over the next few years, thanks to their strong financial profiles and visible growth prospects. That high probability of a steadily rising income stream makes this trio great options for income investors to buy these days.
