High-yielding dividend stocks can make ideal passive income investments. The best ones steadily increase their payouts. That can help their investors generate more income in the years to come.
Brookfield Infrastructure Partners (BIP 1.08%)(BIPC +0.00%), Enbridge (ENB +0.39%), and NextEra Energy Partners (NEP 1.88%) offer investors above-average payouts that should keep rising in the future. Investors could potentially hold them for a lifetime of passive income.
The long-term growth trend should continue
Brookfield Infrastructure Partners currently offers a 4.2% dividend yield. That's more than double the 1.6% dividend yield of the S&P 500. To put that difference into context, every $1,000 invested into Brookfield Infrastructure Partners would generate about $42 of annual dividend income compared to around $16 from an S&P 500 index fund.
NYSE: BIP
Key Data Points
That high-yielding payout is on a very sustainable foundation. Brookfield Infrastructure generates very stable cash flows backed by long-term contracts and government-regulated rate structures. Meanwhile, it pays out a reasonable portion (60% to 70%) to investors in dividends. That enables Brookfield to retain some cash to fund expansion projects. The company also has a strong investment-grade balance sheet.
Brookfield's diversified infrastructure portfolio supplies it with lots of growth. Inflation-driven rate increases, volume growth as the economy expands, and expansion projects will grow its funds from operations (FFO) by 6% to 9% per year. In addition, the company recycles capital to enhance growth by selling mature assets and reinvesting the money into higher returning opportunities.
The company expects these growth drivers to power 5% to 9% annual dividend growth. That would continue the upward trend in the payout, which has risen for 14 straight years.
A long streak that seems unlikely to break anytime soon
Enbridge's dividend currently yields 7.1%. That big-time payout is on a very sustainable foundation.
NYSE: ENB
Key Data Points
Enbridge also generates very stable cash flow backed by similar revenue frameworks as Brookfield. Likewise, it has a reasonable dividend payout ratio in the range of 60% to 70% of its cash flow. Finally, it has a strong investment-grade balance sheet with leverage currently at the low end of its target range.
Enbridge's retained cash flow and balance sheet capacity allow it to invest billions of dollars annually on expansion projects and bolt-on acquisitions. The company currently has a multi-billion backlog of expansion projects under construction and more in the pipeline. Projects include natural gas pipeline expansions, renewable energy developments, and new energy projects like renewable natural gas, lower carbon fuels, and carbon capture and sequestration. The company's lower carbon investments position it to continue growing in the decades ahead as the world slowly transitions away from fossil fuels.
Enbridge expects its investments will grow its cash flow per share by 3% annually through 2025 and then by around 5% annually over the longer term. That should give the company the fuel to continue growing its dividend, which it has done for the past 28 years.
Plugged into a powerful trend
NextEra Energy Partners' dividend currently yields 5.8%. The company also supports that payout with a solid financial profile.
NYSE: NEP
Key Data Points
The company primarily owns onshore wind and solar generating facilities. It sells that power to utilities and other end users under long-term fixed-rate contracts. They supply it with predictable cash flow to support its dividend.
NextEra Energy Partners also owns some natural gas pipelines. However, it recently detailed plans to sell those assets to focus all its attention on renewable energy. It will use the proceeds to redeem most of the convertible portfolio equity financings it used to fund its recent expansion. The company will use any remaining money to expand its renewable energy portfolio.
NextEra Energy Partners expects its renewable-powered growth strategy will allow it to continue growing its dividend. The company has increased its payout every year since its formation in 2012. It expects to grow its payout by 12% to 15% annually through at least 2026, powered by additional renewable energy acquisitions from its parent, NextEra Energy, and third-party sellers. It has lots of funding sources to finance that growth, including retained cash and balance sheet capacity.
Excellent income stocks for the long haul
Brookfield Infrastructure, Enbridge, and NextEra Energy Partners pay durable high yielding dividends. They all generate very stable cash flows and have solid financial profiles. Meanwhile, they have ample growth ahead, which should give them the power to continue increasing their payouts. That makes them great stocks to hold for a potential lifetime of dividend income.
