To put it mildly, 2020 has been an awful year for dividend stocks. Hundreds of companies have had to cut back on their payouts as a precaution due to the uncertainties surrounding COVID-19. That left income investors with fewer options.
However, while 2020 exposed weaker dividend payers, it shined a spotlight on the best ones that were able to keep growing them amid the pandemic. Two top options that stand out for investors with a little cash to spare are apartment real estate investment trust (REIT) Camden Property Trust (CPT 0.26%) and energy infrastructure giant TC Energy (TRP -0.33%).
Both companies have sold off a bit this year, despite continuing to grow their dividends, which helped boost their yields. Add that to their top-notch financial profiles and growth prospects, and these dividend stocks should produce durable income for years. That makes them great ways to put $1,000 (or any other small amount) to work.
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A low-cost way to become a landlord
Camden Property Trust is one of several REITs focused on owning apartment communities. Currently, the REIT owns more than 56,000 apartment homes in 14 major U.S. markets. It's diversified geographically, by property type and market location.
That mix has come in handy this year as COVID-19 has put pressure on high-cost markets by pushing renters toward the suburbs, leaving Camden less exposed than other REITs concentrating in urban areas. That's why its stock price has only declined by about 10%, compared to the more-than-20% decline of the average apartment-focused REIT.
Camden can easily withstand the current headwinds facing the sector, thanks to its top-tier balance sheet. It's one of only eight REITs with A-rated credit. It also has plenty of cushion on the dividend, as its payout ratio has averaged less than 80% this year, which is a more-than-reasonable level for a REIT. That strong financial profile enabled it to increase its payout again this year, extending its streak to more than a decade.
With several new communities under construction and lots of financial flexibility to make acquisitions, Camden should have no problem continuing to grow its portfolio, cash flow, and 3.5%-yielding dividend. That combination of yield, growth, and safety makes Camden an excellent way for investors to enjoy the passive income benefits of being a landlord without the associated high costs and headaches of buying and managing an apartment building.
A well-fueled dividend
TC Energy is one of North America's largest pipeline operators. What stands out about those pipelines is that they're nearly immune to fluctuations in energy prices and volumes, thanks to contractual and regulatory protections. Because of that, TC Energy has continued to generate very stable cash flow to support its dividend, which has risen to a 5.5% yield due to a 17% share price decline and an 8.7% dividend increase to start the year.
Despite all the volatility in the energy market, TC Energy has plenty of fuel to continue growing its dividend. The company has an extensive pipeline of contractually secured expansion opportunities underway, including new oil and gas pipeline projects and a life extension of a nuclear power plant. Those projects support the company's view that it can increase its dividend by another 8% to 10% next year and grow it at a 5% to 7% rate post-2021. Further complementing that outlook is its low dividend payout ratio of about 40% of its cash flow and industry-leading credit rating.
Meanwhile, like a growing number of its peers, TC Energy is starting to pivot more toward the clean power industry -- it recently named the president of its power and storage division as the new CEO -- which should enable it to continue growing in the decades to come. With a top-notch financial profile and lots of growth coming down the pipeline, TC Energy is a lower-risk way to collect an energy-fueled dividend.
Great all-around dividend stocks
While 2020 has been challenging for dividend investors, not all payouts have headed lower, as both Camden Property and TC Energy have continued to increase theirs. Add that to their top-notch financial profiles, visible growth prospects, and lower share prices, and the duo look like excellent dividend stocks for investors with a little bit of cash to spare.
