Some companies built their business models to pay attractive dividends. They generate stable and growing cash flow to support an above-average and steadily rising payout.
Clearway Energy (CWEN 0.26%) (CWEN.A 0.28%), Crown Castle (CCI -0.67%), and Kinder Morgan (KMI -0.64%) stand out for their dividends. The trio currently offers yields above 6% on payouts they expect to continue growing. They're great dividend stocks to buy hand over fist right now.
A high-powered dividend stream
Clearway Energy's dividend currently clocks in at 6.1%. That's several times above the 1.6% dividend yield on the S&P 500. For perspective, every $100 invested into Clearway would produce about $6.10 of annual dividend income compared to about $1.60 from an S&P 500 index fund.
The company backs its payout with a large-scale portfolio of clean power assets. Clearway is one of the largest renewable energy producers in the country. It also has some environmentally sound natural gas power plants. It sells the electricity its facilities produce under long-term, fixed-rate power purchase agreements to utilities and large corporations. Those agreements supply Clearway with predictable cash flow to support its dividend.
The company expects to grow its dividend in the upper end of its 5% to 8% annual target range through 2026. Powering that plan is the company's asset rotation program. It sold its thermal assets in 2022, netting nearly $1.4 billion in proceeds that it's steadily redeploying into higher-returning renewable energy assets. Clearway has already lined up enough new investments to put the entire proceeds to work in deals that should close over the next couple of years. That gives it a great line-of-sight on future dividend growth.
A towering dividend
Crown Castle offers a 6.2% dividend yield. The REIT focused on telecommunications infrastructure generates very steady cash flow to support that payout backed by long-term leases for its cell towers, small cell nodes, and fiber assets with mobile carriers.
Demand for this infrastructure is strong and growing. Crown Castle expects 5G to drive a decades-long investment cycle in telecommunications infrastructure. That should enable the REIT to continue adding more tenants to existing infrastructure and build new towers and small cell nodes.
This growing demand should steadily increase Crown Castle's cash flow, enabling it to continue raising its dividend. While the company faces some near-term headwinds from higher interest rates and customer consolidation, it expects those issues to eventually fade. That should allow the company to return to its long-term target of growing its dividend by 7% to 8% annually after 2025. In the meantime, it should still deliver dividend growth, though likely at a more moderate pace (it increased its payout by 6.5% last October).
A well-oiled dividend-paying machine
Kinder Morgan's dividend currently yields 6.5%, one of the 10 highest yields in the S&P 500. The pipeline company generates very durable cash flows to support that payout. Roughly 67% of its annual earnings come from take-or-pay contracts or hedges, meaning it gets paid regardless of market conditions. Meanwhile, 26% has no commodity price risk (only volume risk), while the remaining 7% is market sensitive.
The company pays out a little more than half its steady cash flow in dividends. It retains the rest to finance expansion projects, enhance its already strong balance sheet, and opportunistically repurchase shares. The company currently has $3.7 billion of expansion projects under construction that should come online and generate incremental cash flow over the next few years. Most of those investments are in lower-carbon energy projects, like natural gas pipelines, renewable natural gas production facilities, and carbon capture and sequestration projects.
Kinder Morgan's expansion projects should give it the fuel to continue increasing its dividend. The company has raised its payout in each of the last six years, including by another 2% earlier this year.
These high-yielding payouts will continue getting bigger
Clearway Energy, Crown Castle, and Kinder Morgan offer investors the opportunity to lock in dividend yields above 6%. Meanwhile, those already appealing payouts should continue rising. That makes these dividend stocks excellent options for those seeking an attractive and growing passive income stream.
