Dividend stocks have become hot again now that interest rates are rising and growth in some sectors is starting to slow. But not all dividends are created equal.
Investors buying dividend stocks will want to make sure they have great underlying businesses with reliable cash flows. That's why Vici Properties (VICI 0.18%), NextEra Energy Partners (NEP 1.41%), and Target (TGT 0.70%) are three dividend stocks I think investors should buy hand over fist right now.
Vici Properties
The gambling industry has been on fire in the U.S. for the last two years as people spend more to travel, gamble, and see entertainment in places like Las Vegas. One way to benefit from that trend is through the real estate investment trust (REIT) that owns many of the most iconic gambling properties, Vici Properties.
While Vici doesn't have the same upside as casino operators when the industry grows, healthy casinos mean more likely rent payers. And leases often include a small escalator if revenue at the resort and casino improves.
As far as REITs go, a 4.4% dividend yield isn't the highest on the market, but it's solid and the payout is steadily growing. With profitable resorts providing tailwinds for the business, this is the kind of dividend stock I love right now.
NextEra Energy Partners
The renewable energy business is really driven by companies financing billions of dollars of assets to be built, expecting to recoup their investment over decades. NextEra Energy Partners is one of the leaders in this space, and it's a great dividend stock, boasting a yield of 4.5%.
Cash available for distribution rose 8.6% in 2022 as the company added new projects and also prepared the business to benefit from an increased tax credit under the Inflation Reduction Act.
And keep in mind that contracts with utilities usually extend for more than a decade, giving cash flow predictability to the business.
Opening and operating renewable energy assets may not be exciting because it's like holding a bond. But management expects to grow distributions by 12% to 15% per year through at least 2026. If you're looking for a growing dividend in energy, this is a great pick.
Target
Target doesn't pay the biggest dividend, having just a 2.5% yield, but this is one of the best-positioned businesses in retail today. The company has learned how to leverage its stores to become a convenient online shopping option, and that's allowed it to grow its digital scales more quickly than even Amazon throughout the pandemic.
While the last few quarters have been tough because of adjustments to inventory, sales continue to increase, and that's what we want to see from a retailer. In the fiscal third quarter of 2022, sales were up 2.7% on a comparable basis on top of 12.7% growth a year earlier.
I think Target is one of the companies that really found its way over the last few years as it invested in products like Drive Up and improving groceries in-store. This will pay off long-term as it leverages existing infrastructure to improve the digital experience and getting customers goods even faster. That's why I like the future of this dividend stock.
Rock-solid companies with great dividends
Vici Properties, NextEra Energy Partners, and Target are all riding growth trends in entertainment, energy, and digital retail. And with big, established businesses, they're well positioned for any downturn in the market or the economy. That's comforting when buying dividend stocks you can hold for the long term.
