I typically buy several dividend stocks each month as cash flows into my portfolio. I always have a running list of high-quality dividend payers I want to buy. Topping that list this month are Brookfield Infrastructure Partners (BIP 3.35%), Clearway Energy (CWEN 1.29%) (CWEN.A 0.90%), and NextEra Energy (NEE 0.45%).
Here's why I'm excited to add to my positions in these top dividend stocks in March.
An unbelievable discount
Brookfield Infrastructure Partners is a compelling opportunity these days. The publicly traded partnership trades at a wide discount compared to its corporate twin Brookfield Infrastructure Corporation (BIPC 3.21%):
That price disconnect makes no sense because they're economically equivalent entities. Investors get the same quarterly distribution/dividend payment, which both entities recently increased by 6% to $0.3825 per unit/share. However, given Brookfield Infrastructure Partners' lower unit price, it offers a much higher yield at 4.6% versus 3.5% for the corporate shares. That extra income is well worth the added tax complexities of investing in a publicly traded partnership for me (or, should I say, my accountant).
Meanwhile, that dividend should continue rising at a healthy pace in the coming years. Brookfield Infrastructure expects to grow its funds from operations (FFO) per unit/share by another 12% to 15% this year after increasing it by 12% last year. The company continues to benefit from strong organic growth drivers (inflation-linked contractual rate increases and expansion projects) and its value-enhancing capital recycling strategy. Those catalysts should continue powering its growth for years to come.
Visible growth ahead
Clearway Energy's capital recycling strategy is also powering its growth. The clean energy infrastructure company sold its thermal business for $1.3 billion of net proceeds last year. That's giving it the cash to invest in higher-returning renewable energy acquisitions.
The company has deals lined up to put all that capital to work over the next few years acquiring renewable energy projects as they reach commercial operations. That gives it the line of sight to grow its cash flow at a rate that will support dividend growth in the upper end of its 5% to 8% annual target range through 2026. It makes the 4.8%-yielding payout even more attractive.
Meanwhile, Clearway should have plenty of opportunities to continue growing past that timeframe. Its parent company, Clearway Energy Group (CEG), has an extensive renewable energy project backlog that it can drop down to its affiliate in the future. In addition, CEG's co-owners, Global Infrastructure Partners and TotalEnergies, have growing portfolios of clean energy infrastructure assets that they could sell to Clearway Energy.
A powerful new growth tailwind
NextEra Energy has lots of visible growth ahead. The clean energy-focused utility recently extended its growth outlook through 2026. It expects to grow its earnings per share at a 9.4% compound annual rate through 2026 from 2021's base at the high end of its ranges. Meanwhile, it anticipates dividend growth of around 10% annually through at least 2024. It recently delivered a 10% increase for 2023, boosting its yield to 2.6%.
Powering that outlook is the company's massive clean energy infrastructure pipeline. The company has an extensive backlog of wind energy, solar energy, storage, and transmission projects under construction and in various development stages.
The recently passed Inflation Reduction Act further enhances that outlook. NextEra Energy's CEO John Ketchum called the landmark renewable legislation "transformational for our industry and our business" on the company's fourth-quarter conference call. It provides clear incentives to invest in a broad array of renewable technologies. That leads the company to believe it will help drive long-term value growth for investors.
Great dividend growth stocks
Brookfield Infrastructure, Clearway Energy, and NextEra Energy are some of my favorite dividend-paying stocks. They all offer above-average yielding payouts that they should continue growing in the coming years. I can't wait to add more shares to my portfolio this month.
