Some companies have a knack for paying dividends. They've built durable businesses that generate lots of steady cash flow. That gives them the money to pay an attractive dividend while investing in expanding their operations.
Black Hills (BKH -0.63%), Brookfield Renewable (BEPC 0.09%) (BEP 0.19%), and NextEra Energy Partners (NEP -0.89%) stand out to a few Fool.com contributors for their phenomenal dividend track records. They expect the trio to continue paying a growing dividend for many years to come, and they could supply long-term investors with a lifetime of passive income.
This boring utility is a Dividend King
Reuben Gregg Brewer (Black Hills): When it comes to dividends, the preeminent achievement is to be a Dividend King, which requires 50-plus years of annual dividend increases. It's proof of both business success and a staunch commitment to returning value to shareholders. Regulated utility Black Hills is just such a Dividend King.
Even better, the electric and natural gas utility's dividend yield is near a 10-year high at roughly 4.5%. So Black Hills looks fairly well priced today. To be fair, dividend-paying utilities tend to compete with other income options, like CDs. You might be able to find a safe CD that generates a similar amount of income. But when you add in the regular dividend increases, which you won't get from a CD, Black Hills comes out on top.
Then there's the company's service area, which is spread across Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. It has been seeing faster customer growth than the average population growth for the United States, which means its business is growing. That's exactly the type of thing you want to see for a utility, as it means there's a growing revenue stream and an increasing likelihood that regulators will approve the company's investment and rate plans.
Black Hills will never turn into a hot growth stock, so don't expect it to ever be an investment you mention at a cocktail party. But if slow and steady is OK with you, this reliable dividend stock could easily be a cornerstone investment you own forever.
A powerful dividend stock
Matt DiLallo (Brookfield Renewable): Brookfield Renewable has an excellent track record of paying dividends. The renewable energy giant has grown its payout by at least 5% per year since its public listing in 2011. Meanwhile, its predecessors have delivered 6% compound annual dividend growth over the past 20-plus years.
There's a lot more dividend growth ahead. The company sees a quartet of drivers powering double-digit per-share growth on the basis of funds from operations (FFO) for the next several years:
Image source: Brookfield Renewable
As that slide notes, the company has already secured and funded at least 8% annual growth during that timeframe. That will give it plenty of power to deliver on its plan of growing the dividend, which currently yields an attractive 4.8%, by 5% to 9% per year. Meanwhile, it has the financial capacity and investment opportunities to push that rate into the double digits.
Mergers and acquisitions represent a major catalyst for Brookfield Renewable, and it has showcased its ability to secure needle-moving deals this year. The company and its partners unveiled a landmark transaction to acquire Australian utility Origin Energy earlier this year. The deal will expand the company's operations into that country while showcasing its ability to lead large-scale decarbonization investments. Brookfield aims to replace Origin's coal power plant by building new renewable energy and storage capacity. In addition, Brookfield agreed to acquire Duke Energy's commercial renewable energy business this year. That deal added an income-producing operating portfolio and development pipeline.
The world needs to invest trillions of dollars to decarbonize the economy over the next 30 years. That will provide Brookfield Renewable with ample opportunities to continue expanding. It should have plenty of power to provide its investors with a growing income stream in the coming decades.
These dividends should keep growing
Neha Chamaria (NextEra Energy Partners): NextEra Energy Partners has pretty much everything you'd want in a dividend stock. It has a strong dividend history, offers a high yield of 6.5%, and is committed to increasing dividends annually backed by steady cash-flow growth. The last bit is particularly important, as dividend growth has been a huge contributor to the stock's total returns in the past and should remain so.
In fact, NextEra's business objective itself could compel an income investor to own the stock forever. As the company states, its business objective is to acquire a stake in contracted clean energy projects from parent NextEra Energy's clean energy arm or third parties that'll allow it "to increase its cash distributions to the holders of its common units over time." Simply put, NextEra Energy Partners acquires clean energy assets that can generate steady cash flows and enable the company to increase its payout in the long run. NextEra Energy Partners is a master limited partnership, and they're typically known for steady cash distributions.
Right now, NextEra Energy Partners is targeting 12% to 15% annual dividend growth between 2022 and 2026 and already has a plan in place to achieve its goal. Other than potential acquisitions from its parent, NextEra Energy Partners is keen on third-party acquisitions to grow its asset base and cash flows. The company believes there's a 300-gigawatt investment opportunity from potential third-party acquisitions and industry growth through 2026.
A double-digit annual dividend increase makes for a very compelling argument in favor of NextEra Energy Partners stock, especially when those higher dividends will be backed by cash-flow growth. With NextEra Energy Partners also on its way to transforming into a 100% renewable energy company, I believe this is one of the best dividend stocks you could buy today and hold forever.
