Dividend stocks can be very rewarding investments. In addition to supplying investors with income, many top dividend stocks deliver solid stock price appreciation, driven by earnings growth. Those total returns can add up over time.
Brookfield Infrastructure (BIPC +0.00%)(BIP +0.57%), Realty Income (O +0.02%), and NextEra Energy (NEE +0.01%) have made their investors a lot of money over the years. Despite their strong performances, all three are currently on sale. That makes now a great time to buy these wealth-creating dividend stocks.
Tossed in the bargain bin
NYSE: BIPC
Key Data Points
Shares of Brookfield Infrastructure currently sit about 35% below their 52-week high, with the bulk of that decline coming in the last few months. Because of that, the global infrastructure company currently sells for a very cheap price.
The company expects to produce about $3 per share of funds from operations (FFO) this year. With the stock recently in the low $30s, it trades at slightly more than 10 times its earnings. That's dirt cheap, considering the S&P 500 index currently fetches about 20 times its earnings.
That's a fantastic price to pay for this wealth-creating machine. Since its formation in 2008, Brookfield Infrastructure has produced a 14% annualized total return. That has trounced the S&P 500's 10% annualized total return during that period. Powering that market-beating return has been Brookfield's growth. It has grown its earnings at an 11% compound annual rate over the last decade while increasing its dividend at a 9% compound annual rate.
The company expects to continue growing briskly. It sees its FFO per share rising at a more than 10% annual rate, powered by its organic growth drivers and acquisitions. That should give it plenty of fuel to continue growing its 4.9%-yielding dividend, which it sees rising at a 5% to 9% annual rate over the long term.
An excellent price for this real estate wealth creator
NYSE: O
Key Data Points
Realty Income has fallen more than 20% below its 52-week high. That has the real estate investment trust (REIT) trading at a bargain valuation and attractive dividend yield (currently 5.7%).
The REIT expects to produce about $4 per share of adjusted FFO this year. With shares recently in the low $50s, it trades at about 13 times FFO. That's a great price to pay for a steady value creator. Since its public market listing in 1994, Realty Income has produced a 13.4% compound annual total return. A big driver has been its steadily rising dividend, which it has grown at a 4.3% compound annual rate.
Realty Income is in a great position to continue growing value for its investors despite the pressures currently facing the real estate sector from higher rates. It recently agreed to acquire fellow REIT Spirit Realty in a $9.3 billion deal. That transaction provides it with a nice baseline growth rate for 2024. Meanwhile, it has lots of financial flexibility to continue making value-enhancing investments. These factors put it on track to deliver a double-digit total return next year, even if its valuation doesn't improve.
A premium utility at a discounted price
NYSE: NEE
Key Data Points
Shares of NextEra Energy have lost a third of their value from their 52-week high. That has the wealth-creating utility trading at a compelling valuation and dividend yield (currently 3.2%).
NextEra Energy has historically fetched a premium valuation compared to its peers in the utility sector because it's growing faster than rivals. It has increased its earnings at a 9.8% compound annual rate over the last decade while boosting its dividend at an 11% compound annual rate. That helped power a 10.3% annualized total return over the past 10 years.
However, with its shares slumping, it now trades at a discount to its peer group average's PEG ratio:
Image source: NextEra Energy.
One of the main factors weighing on shares of NextEra Energy is the concern that higher interest rates will slow its growth. However, the company doesn't see rates impacting its outlook. It recently reaffirmed its expectations that its adjusted earnings per share will rise by 6% to 8% annually through 2026. Further, the company reiterated its belief that it would be disappointed if it didn't deliver results near the top end of that growth range.
Powering the company's confidence is its strong investment-grade balance sheet. It has an A bond rating, which gives it a cost of capital advantage. It can borrow money at lower costs and better terms than financially weaker rivals. It also has the balance sheet strength to utilize interest rate swaps and other financial products to reduce the impact of higher rates.
You won't want to miss these sales
High-quality companies don't go on sale very often. That's why investors will want to consider taking advantage of the sell-offs in Brookfield Infrastructure, Realty Income, and NextEra Energy. They're proven wealth creators that should be able to continue growing shareholder value in the future as they increase their earnings and attractive dividends.
