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Our Favorite Dividend Stocks for 2022 and Beyond

Key Points

  • Enbridge has consistently increased its dividend for nearly three decades.
  • NextEra Energy Partners sees high-powered dividend growth ahead.
  • Enterprise Products Partners offers a high yield with lots of upside potential.

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These dividend-paying energy stocks stand out as great ones to buy for the long haul in 2022.

Dividend stocks have historically been excellent investments. They've routinely outperformed nonpayers, with the best returns coming from companies that consistently increase their dividend payments.

Because of that, we're always on the lookout for great dividend stocks. With that in mind, we asked some of our contributors for their favorite dividend stocks for 2022 and beyond. Here's why Enbridge (ENB 0.24%)NextEra Energy Partners (NEP 0.16%), and Enterprise Products Partners (EPD 0.16%) rose to the top of their lists.  

A cheering person holding a calculator with the word dividends on the screen.

Image source: Getty Images.

Investing for dividend growth

Reuben Gregg Brewer (Enbridge): North American midstream giant Enbridge just recently announced an annual dividend increase of 3%. That's not particularly exciting, but over the past 27 years the annualized growth in the dividend is roughly 10%. That's exciting! The year-to-year increases fluctuate and depend partly on other options for the cash the company generates. For example, the yield is a historically high 6.6% today, so management explained during Enbridge's third-quarter earnings conference call that it doesn't feel the company's dividend growth is being recognized by investors. Thus, putting that cash to work in other ways makes more sense.

ENB Chart

ENB data by YCharts

This backdrop means that Enbridge is, instead, buying back its shares, which management believes are undervalued, and investing capital into its various businesses. Notably, on the capital investment front, it has been putting an increasing amount of cash into its renewable power operations, which positions it well for the changing future of the energy sector. And while it is doing all of these things, the company's payout ratio will decline as the business grows and the share count shrinks. That, in turn, will give Enbridge the leeway to jump dividend growth back up again when the market finally recognizes the value on offer here. So, for now, this is a yield story, but it could soon turn back into a dividend growth story. However, if you buy now, you can get both a high yield and dividend growth.

High-powered dividend growth ahead

Matt DiLallo (NextEra Energy Partners): NextEra Energy Partners provides the best of both worlds for dividend investors: income and growth. The clean energy infrastructure company offers an attractive dividend yield. At its current rate of nearly 3.6%, it's more than double that of the S&P 500

That payout is on reasonably solid ground. NextEra Energy Partners generates relatively stable income backed by long-term, fixed-rate contracts on its renewable energy assets and natural gas pipelines. It pays out a reasonable amount of this cash flow to support its high-yielding dividend, anticipating a dividend payout ratio in the low 80% range in 2022. On top of all that, it has a solid balance sheet with ample financial flexibility.

Meanwhile, NextEra Energy Partners sees significant growth ahead. The company currently expects to grow its dividend by a 12% to 15% annual rate through at least 2024. That's the fastest rate among dividend-focused clean energy infrastructure companies.

The company has several growth drivers, including acquiring clean energy assets from third parties and its parent, utility NextEra Energy. NextEra has a vast and growing portfolio of clean energy infrastructure assets that it can drop down to the partnership. Meanwhile, with demand for clean energy growing as the global economy races to offset the potential impact of climate change, NextEra Energy Partners should have no shortage of additional investment opportunities. It also has the financial flexibility to continue expanding, with several funding partners willing to provide low-cost capital to complete deals.  

NextEra Energy Partners is one of my favorite dividend stocks because it offers a high dividend yield and high growth rate. Those two factors should give it the power to generate above-average returns in 2022 and beyond.

High yield, strong growth potential

Neha Chamaria (Enterprise Products Partners): In a year when oil prices rocketed, Enterprise Products Partners barely received any love from the market -- the stock ended 2021 with a muted 12% gain. It's not really hard to understand why that happened. Energy investors shifted focus and pumped money into upstream oil and gas stocks that stand to benefit directly from higher oil prices unlike a midstream company Enterprise Products Partners.

However, the market overlooked the fact that Enterprise Products Partners also steadily grew its distributable cash flow (DCF), which could support regular and bigger dividends in 2021. Earlier this month, the company increased its dividend by 3.3%, marking its 23rd consecutive annual dividend raise. That dividend increase percentage may not entice investors, but don't forget that the stock also yields a massive 7.7% right now and generates enough cash flows to cover its dividends comfortably.

In fact, Enterprise Products Partners may very well end its financial year 2021 with one of its highest-ever DCFs. And 2022 could be an even bigger year given the company's latest move: Enterprise Products Partners is about to acquire Navitas Midstream Partners for $3.25 billion in cash in a deal that's expected to be immediately accretive to its DCF. The growth prospects make Enterprise Products Partners, with its high dividend yield, a compelling dividend stock to own for 2022 and beyond.

Matthew DiLallo owns Enbridge, Enterprise Products Partners, NextEra Energy, and NextEra Energy Partners. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer owns Enbridge. The Motley Fool owns and recommends Enbridge. The Motley Fool recommends Enterprise Products Partners and NextEra Energy. The Motley Fool has a disclosure policy.

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