There's a rule of thumb in investing called the "rule of 72," which calculates how long it will take to double your money at a given rate of return. You take 72 and divide it by the assumed return to get the number of years. For example, an investment earning a 10% annual return can double an investor's money in 7.2 years. Using that math, an investment earning slightly more than 10% annually would double an investor's money in under seven years.
One type of investment that has delivered that level of return over the years is dividend growth stocks, which are companies that steadily increase their dividend payments. Since 1973, dividend growers have produced a 10.68% annualized total return, according to data by Ned Davis Research and Hartford Funds.
Many companies have excellent dividend growth track records that seem likely to continue. Three great options that should be able to deliver that level of return over the next seven years are Brookfield Infrastructure (BIPC +0.00%)(BIP +0.38%), Crown Castle (CCI +0.83%), and NextEra Energy (NEE 1.89%).
NYSE: BIPC
Key Data Points
The fuel to keep growing
Brookfield Infrastructure has been a wealth-creating machine over the years. The global infrastructure operator has delivered 17% annualized total returns since its formation in early 2008.
A big key to its success has been its ability to grow its cash flow and dividend at high rates. Over the last decade, Brookfield has grown its funds from operations (FFO) per share by 11% per year, supporting a 9% compound annual dividend growth rate.
The company is in an excellent position to deliver similar growth in the future. It sees its FFO per share growing by 12% to 15% over the next year, powered by strong organic growth and recent acquisitions. Longer term, it targets a 6% to 9% annual organic growth rate, fueled by inflation-driven contract rate escalations, volume growth as the global economy expands, and expansion projects. It sees additional upside from its value-enhancing capital recycling strategy of selling mature assets and reinvesting the proceeds into higher returning opportunities.
These drivers should give Brookfield the power to grow its 3.5%-yielding dividend by 5% to 9% per year. That combination of income and growth should enable Brookfield to continue producing double-digit total annual returns in the coming years.
NYSE: CCI
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Connected to a powerful growth trend
Crown Castle has grown its dividend at a 9% compound annual rate since converting to a REIT in 2014. That's helped it deliver total annualized returns of more than 10%.
Crown Castle sees a lot of growth ahead. It anticipates a decade-long investment cycle as mobile carriers build out faster 5G networks. That should enable the company to build more cell towers, small cell nodes, and fiber optic networks to support this faster network.
The company believes those investments will enable it to grow its FFO at a rate to support 7% to 8% annual dividend growth over the long term. With its current payout approaching a 5% yield, Crown Castle has the potential to continue producing double-digit total annualized returns in the coming years.
NYSE: NEE
Key Data Points
Lots of power to continue growing rapidly
NextEra Energy is a proven wealth creator. The clean energy-focused utility has grown its adjusted earnings per share at an 8.4% compound annual rate over the last 15 years. Meanwhile, it has increased its dividend at an even faster 9.8% compound annual rate. That's enabled the company to deliver powerful total returns approaching 20% annualized over the last decade.
NextEra expects to grow its earnings, cash flow, and dividend at high rates in the coming years. It anticipates it can grow its adjusted earnings per share and operating cash flow at a roughly 10% annual rate through 2025 at the high end of its guidance range. That should support about 10% annual growth in its more than 2%-yielding dividend through at least 2024.
Meanwhile, the company continues to line up new power sources to drive future growth. It recently expanded its landfill gas-to-electricity capabilities, adding another growth driver. The company aims to have a dozen businesses generating over $100 million of annual earnings by 2025, up from seven last year. That could give it more power to grow its earnings and dividend in the future, putting it in a strong position to maintain its pace of generating double-digit total annual returns.
A powerful combination
Brookfield Infrastructure, Crown Castle, and NextEra Energy are proven wealth creators. They've grown their earnings at healthy rates, enabling them to steadily increase their dividends. That combination of income growth and capital appreciation has helped them produce double-digit total annualized returns, enabling their investors to double their money over the last seven years. They remain in a strong position to repeat that performance over the next seven years. That makes them great options for investors seeking a lower-risk way to potentially double their money by the end of the decade.
