Hundreds of companies pay a dividend. Because of that, it can be easy to overlook some high-quality dividend payers. Three relatively unknown names with excellent track records are Atlantica Sustainable Infrastructure (AY 0.65%), Delek Logistics Partners (DKL 1.25%), and Pembina Pipeline (PBA 0.63%). Here's why income-focused investors won't want to miss these dividend stocks.
A sustainable income stream
Atlantica Sustainable Infrastructure has been a solid dividend stock in recent years. The company has routinely increased its payout since resetting the dividend in 2016 following a corporate rebranding and strategy shift. It currently offers an attractive dividend yield of 5.3%.
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Atlantica should be able to continue delivering a steadily rising dividend. The company focuses on operating sustainable infrastructure like renewable energy generating facilities, natural gas power plants, electricity transmission lines, and water desalination plants. This infrastructure produces steady cash flow backed by long-term contracts.
The company estimates that it has the financial capacity to invest about $300 million per year to continue expanding its sustainable infrastructure portfolio. That should help grow its cash available for distribution by 5% to 8% per share annually through at least 2025. The company's steadily rising cash flow should enable it to pay a sustainable dividend.
An impressive streak
Delek Logistics Partners has quietly put together a tremendous growth track record. The master limited partnership (MLP) has increased its payout for 37 straight quarters. Equally impressive, the pipeline company currently yields an attractive 7%.
The MLP should have plenty of fuel to continue growing its payout. Higher oil prices are giving producers the confidence to boost their drilling activities. That's leading to higher volumes for Delek's existing assets while providing it with new expansion opportunities. The company recently agreed to acquire 3Bear to bolster its position in the oil-rich Permian Basin in Texas. That deal will immediately boost its cash flow while potentially providing the MLP with more growth opportunities.
Delek has a strong financial profile to fund its growth while continuing to pay an attractive and growing distribution. It ended the first quarter covering its high-yielding payout by 1.21 times while boasting a low leverage ratio. This combination of solid financials and growth prospects makes it an excellent option for investors seeking an attractive high-yield dividend stock.
A pipeline to passive income
Canada's Pembina Pipeline has been a great dividend stock over the years. The company pays a monthly dividend that currently yields 5.2%. It has either maintained or increased that payment every year since 1998. Overall, it has grown it at a 5% average annual rate over the past decade.
That payout is on rock-solid ground. Pembina currently uses 53% of its cash flow (65% to 70% of which is backed by stable fee-based contracts) to cover its dividend. Meanwhile, it has a strong investment-grade balance sheet. This all gives it ample financial flexibility to continue expanding its operations to support dividend growth.
It recently agreed to create a large-scale joint venture with private equity giant KKR to merge their Western Canadian processing assets. The deal will bring in some cash to fund new growth opportunities, repay debt, and repurchase shares. The transaction will also grow its cash flow, which will enable Pembina to boost its dividend by another 3.6%.
Meanwhile, the company has several growth projects underway, including new oil and gas pipelines. It's also exploring lower-carbon investment opportunities like carbon capture and hydrogen. These investments should help grow its cash flow to support its dividend.
Income investors won't want to miss these dividend stocks
Atlantica Sustainable Infrastructure, Delek Logistics Partners, and Pembina Pipeline are far from household names. Because of that, many investors don't know about their excellent dividend track records. That's causing them to miss out on stocks that offer high yields that the companies should be able to sustain and grow in the coming years.
