If you depend on stocks to generate income, you want the dividend payments to be like clockwork. That requires the underlying businesses to be solid and reliable.
Of course, you'd also like to see those dividends increase over time. Otherwise, inflation could chip away at the amount of money you make and potentially lower your standard of living.
The good news is that plenty of stocks offer reliable and growing dividends. Here are three dividend stocks in particular that should practically be money machines.
AbbVie (ABBV 1.93%) pays a dividend that I think any income investor would love. The dividend currently yields more than 5%. AbbVie has increased its dividend payout for 49 consecutive years and is knocking at the door of becoming a Dividend King (S&P 500 members with at least 50 years in a row of dividend hikes).
My view is that AbbVie's underlying business is even more stable than it appears at first glance. Some investors focus on the problems that will soon face the company's top-selling drug, Humira. Beginning in 2023, biosimilar rivals to the blockbuster autoimmune disease drug will enter the U.S. market. However, AbbVie should be well positioned to handle the inevitable decline of its longtime flagship product.
Two successors to Humira are already generating fast-growing sales. Although AbbVie hasn't reported its full-year 2020 results yet, Rinvoq and Skyrizi made well over $2 billion last year. The company expects the two drugs will achieve combined peak annual sales of $15 billion. That will go a long way toward offsetting expected sales declines for Humira, which likely pulled in around $20 billion in 2020.
But AbbVie has plenty of other growth drivers in addition to these two rising stars. Blood cancer drugs Imbruvica and Venclexta continue to enjoy strong momentum. Sales are picking up rapidly for antipsychotic drug Vraylar. AbbVie also has an up-and-coming migraine drug, Ubrelvy, as well as another promising migraine candidate, atogepant, that could soon win regulatory approval. I think that AbbVie will be able to keep increasing its dividends for a long time to come.
2. Brookfield Infrastructure Partners
Brookfield Infrastructure Partners (BIP 0.71%) offers a dividend yield of around 3.6%. Its distributions have increased by a compound annual growth rate of 10% since the company was founded in 2008.
The company's business model is remarkably resilient. Brookfield Infrastructure owns infrastructure assets like cell towers, data centers, natural gas pipelines and storage facilities, railroads, ports, and toll roads. These properties generate steady cash flow regardless of what's going on with the economy thanks to the company's long-term contracts with customers.
Brookfield Infrastructure's management refers to the company as a "grow-tility." It has the stability of a utility combined with strong growth prospects. The company targets generating total returns of around 15% over the long term.
The company is organized as a limited partnership (LP), which presents some tax complications. However, you can also buy shares of Brookfield Infrastructure Corporation (BIPC 3.49%), a separate entity created last year. It's the same underlying business as the LP, but organized under a traditional corporate structure. Brookfield Infrastructure Corporation pays the same dividend as Brookfield Infrastructure Partners. However, its yield is a little lower because of the differences in share prices.
3. Innovative Industrial Properties
If you want to buy shares of a dividend money machine that's also a fantastic growth stock, you'll definitely want to check out Innovative Industrial Properties (IIPR 4.94%). The company's dividend currently yields close to 2.5%. IIP has increased its dividend by 727% since initiating a dividend in late 2017.
The company is organized as a real estate investment trust (REIT) and focuses on the U.S. medical cannabis industry. IIP buys properties from medical cannabis operators, then leases the properties back to the operators. Its weighted-average remaining lease term is 16.6 years, giving the company a steady revenue stream well into the next decade.
IIP's growth has been breathtaking. Its revenue and earnings continue to soar as the REIT adds more properties. And IIP isn't having any problems finding more properties to buy and lease, signing its latest deal just a few days ago with multistate cannabis operator Harvest Health & Recreation.
It's possible that IIP could face more competition in the future. However, it's just as likely that the expansion of the U.S. medical cannabis market will create enough opportunities for IIP to keep its momentum going for years. I view IIP as a dividend investor's dream.