Buying and holding dividend stocks is an easy way to start generating passive income. Many companies pay their investors a share of their profits each quarter (or each month, in some cases). Those payouts are often increased as the companies grow their earnings.
There are many high-quality dividend stocks that pay reliable and steadily rising dividends. Here are five top-notch companies that offer higher-yielding dividends that should grow in 2024 and beyond.
|
Company |
Current Yield |
Annual Dividend from a $1,000 Initial Investment |
|---|---|---|
|
Energy Transfer (ET 0.12%) |
9.02% |
$90.20 |
|
6.08% |
$60.80 |
|
|
Realty Income (O -0.17%) |
5.42% |
$54.20 |
|
4.28% |
$42.80 |
|
|
Verizon (VZ 1.17%) |
7.07% |
$70.70 |
|
Total |
6.37% |
$318.70 |
Data source: Google Finance and author's calculations.
As that table shows, $5,000 invested evenly across these five companies could produce more than $300 in dividends next year. And they're great options for those seeking to generate a steadily rising passive income stream.
Energy Transfer
Energy Transfer is a master limited partnership (MLP) that operates midstream energy assets such as pipelines and processing plants. Those assets produce stable cash flows backed by long-term contracts and government-regulated rate structures. That provides Energy Transfer with predictable cash flow to pay dividends.
The MLP typically distributes a little more than half its cash flow to investors. It retains the rest to fund expansion projects and maintain a strong financial profile. Energy Transfer currently has several projects under construction that should start contributing to its cash flow in 2024. On top of that, the company recently made two needle-moving acquisitions. Those growth drivers will give the MLP plenty of fuel to hit its target of growing its already massive payout by 3% to 5% per year.
Clearway Energy
Clearway Energy owns and operates renewable energy and natural gas power generating facilities. It sells the electricity those assets produce to utilities and corporate buyers under long-term, fixed-rate agreements. Those contracts supply it with predictable cash flows.
The company has set a target for growing its already high-yielding payout by 5% to 8% annually, and expects its hikes will land near the upper end of that target range through 2026. It has already secured all the investments and funding needed to achieve that. It cashed in on its thermal business in 2022, giving it funds to recycle into higher-returning renewable energy investments. It has already closed several acquisitions that should power growth in 2024. Meanwhile, it has secured deals to buy several more renewable energy projects that are currently under development, giving it a clear view of how it will position itself to cover the dividend growth it is targeting.
Realty Income
Real estate investment trust (REIT) Realty Income focuses on commercial real estate. It has a diversified portfolio of properties (primarily retail, industrial, and gaming) being rented out under long-term net leases. That lease structure provides it with steadily rising rental incomes, as the rates often rise each year.
The REIT steadily expands its portfolio by investing in additional income-generating real estate. It recently agreed to buy fellow REIT Spirit Realty in a $9.3 billion deal, which will boost its adjusted funds from operations by more than 2.5% per share next year. That's over half its targeted annual growth rate of 4% to 5%. The company has lots of ways to continue growing because it has steadily expanded its reach into new property types (data centers and vertical farming), countries (Italy and Ireland), and investment platforms (credit). Its steady growth should enable Realty Income to continue hiking its monthly payouts, something it has done 123 times since its public market listing in 1994.
Brookfield Infrastructure
Brookfield Infrastructure owns a diversified portfolio of infrastructure businesses in the utility, energy midstream, transportation, and data infrastructure industries. These businesses generate steadily rising cash flows backed by long-term contracts and government-regulated rate structures that typically feature inflation-linked rate escalation clauses. That gives it the funds to pay a growing dividend. Brookfield has increased its payout for 14 straight years, and at an 8% annualized rate over the last decade.
The company aims to keep increasing its payouts by 5% to 9% annually. Its revenue growth drivers include inflation-linked rate increases, development projects, and acquisitions. Brookfield has secured four needle-moving deals this year (three data center investments and a leading global container leasing company). Those acquisitions should give it the fuel to grow its funds from operations per share at a double-digit-percentage pace again in 2024.
Verizon
Telecom giant Verizon needs no introduction. It's a leading provider of mobile and broadband services. Those businesses generate tremendous cash flows, giving the company the funds to invest in growing its business (5G), pay a steadily rising dividend, and maintain a strong balance sheet. Verizon delivered its 17th straight annual dividend hike in 2023.
That steady upward trend should continue. The telecom recently passed the peak investment phase for its 5G network, which will free up additional cash flow that it can use for debt reduction. Falling debt and its cost-cutting initiatives should further boost its cash flow. Meanwhile, its 5G investments are driving revenue growth as more customers upgrade to that faster network. Verizon's growing cash flow and falling debt levels will put it in an even better position to continue increasing its dividends in the future.
High-quality income stocks
Energy Transfer, Clearway Energy, Realty Income, Brookfield Infrastructure, and Verizon are excellent dividend stocks. They offer investors high-yielding payouts that should continue rising in the future. Because of that, they would be great ways to start generating passive income in 2024.
