The current dividend yield on the S&P 500 is around 1.6%, well below its historical average of over 4%. Many stocks in that broad market index offer even lower dividend yields.
While that means income-focused investors have fewer appealing options these days, they do have some. Brookfield Renewable (BEPC 0.09%) (BEP 0.19%), Public Storage (PSA -0.37%), Southern Company (SO -1.56%), and Stag Industrial (STAG -0.17%) stand out for their above-average dividends. The quartet offers payouts above 4%. Even better, they should continue growing in the future. That makes them great options for investors seeking sustainable income streams.
Plugged into a powerful megatrend
Brookfield Renewable currently yields 4.8%. The renewable energy juggernaut generates very predictable cash flow by selling the emissions-free electricity it produces under long-term power purchase agreements to utilities and large corporations. Brookfield's contracts typically index rates to inflation, driving steady growth. The company estimates this factor will increase its funds from operations (FFO) per share by 2% to 3% per year.
The company has several other growth drivers. Brookfield has a massive pipeline of expansion projects in various phases of development. It also has an active capital recycling strategy (selling lower-return assets to fund higher-returning new investments) to enhance growth. Brookfield believes these drivers will grow its FFO per share by more than 10% annually, supporting the company's plan to increase its dividend by 5% to 9% per year. Brookfield has increased its payout by at least 5% annually for the last dozen years.
The flexibility to continue growing
Public Storage currently yields 4.4%. The self-storage real estate investment trust (REIT) collects relatively steadily rising rental income. Demand for self-storage space tends to be incredibly durable because people and businesses still need places to store their stuff, even during a recession. Further, demand for self-storage space has historically grown at a healthy clip.
The company has one of the best balance sheets in the entire REIT industry. That gives it ample financial flexibility to develop new self-storage properties and make acquisitions. The company is currently investing $554 million to develop 2.5 million square feet of storage space and spending $473 million to expand existing locations. In addition, the REIT recently agreed to buy Simply Self Storage in a $2.2 billion deal.
Public Storage's growth drivers support its ability to pay a stable and growing dividend. While the REIT hasn't increased its payout every year, Public Storage made up for that earlier this year by boosting it by 50%. It has grown the dividend by 140% over the last decade.
The power to continue paying a stable and growing dividend
Southern Company pays a dividend yielding 4.2%. The electric and gas utility generates very predictable earnings backed by government-regulated rate structures and steady demand for its services. The company has an excellent track record of paying dividends, having delivered a stable or growing dividend for 76 straight years -- growing it in each of the last 22.
That steady upward trend should continue. Southern Company is in the process of completing the country's first new nuclear power plant in a generation. Vogtle Unit 3 recently started commercial operations, while Unit 4 should start up by early next year at the latest.
The long-delayed project will supply steady emissions-free power to its customers while generating stable income for Southern. The company estimates the project will increase its cash flow from operations by about $700 million annually. That will give it more power to pay dividends, continue investing in growing its operations and reducing its emissions, and maintain a sound balance sheet.
Stable growth
Stag Industrial's dividend currently yields 4.1%. The industrial REIT stands out because it pays a monthly dividend.
The company owns a diversified portfolio of industrial properties, including warehouses and light manufacturing facilities secured by long-term leases. Those contracts supply the company with steadily rising rental income, driven by clauses that escalate rents by more than 2.5% per year. Meanwhile, strong demand for rental properties is driving up market rents, enabling Stag Industrial to capture much higher rates as legacy leases expire.
In addition to rent growth, Stag Industrial has an excellent track record of making value-enhancing acquisitions. It will buy income-producing operating properties and those with value-add upside potential through leasing or redevelopment opportunities. The REIT has acquired around $750 million of properties annually over the last eight years.
These growth drivers enable the REIT to steadily increase its monthly dividend. It has raised its payout every year since its public market listing in 2011.
High-quality income stocks
Brookfield Renewable, Public Storage, Southern Company, and Stag Industrial have been great dividend-paying stocks over the years. The companies generate relatively stable incomes, giving them money to support their high-yielding payouts and continue expanding their operations. That steady growth should continue, making these great dividend stocks to buy and hold for income that could last a lifetime.
