The stock market has been red-hot over the past year. The S&P 500 surged more than 25%, while the Nasdaq's value soared by about 33%. At some point, the market will take a breather.
Market sell-offs are often ideal times to buy high-quality companies at great prices. NextEra Energy (NEE 0.06%) and Brookfield Infrastructure (BIP 1.08%)(BIPC +0.00%) will probably fall during the next market slump. That would be a great opportunity to scoop up shares of these supercharged dividend stocks.
The powerful dividend growth should continue
NYSE: NEE
Key Data Points
NextEra Energy is a leader in clean energy. The utility has invested heavily in building a leading renewable energy business. It's now one of the world's top producers of power from the wind and sun.
That strategy has paid big dividends over the years. NextEra has grown its adjusted earnings per share at a 10% compound annual rate over the past decade. That has given it the power to increase its dividend at an 11% compound annual rate. It currently yields 2.8%, roughly double the S&P 500's dividend yield (1.4%).
NextEra Energy expects to continue delivering supercharged dividend growth for the next few years. Earlier this year, it extended its target of delivering above-average dividend growth of roughly 10% annually through 2026. Two factors power that view. It has a low dividend payout ratio (59% at the end of last year compared to 65% for its peers). It also expects to deliver adjusted earnings-per-share growth at or near the top end of its expected ranges (6% to 8% per year) through 2026.
The company is capitalizing on strong demand for renewable energy. The first quarter was its second-best quarter in history for new renewables and storage project originations (and the best-ever quarter for solar and storage). Robust renewable energy demand drives its view that it can continue growing briskly in the future.
A market sell-off would likely send shares of NextEra Energy lower. However, that would enable investors to lock in a higher dividend yield on new shares, positioning them to earn more income in the future. Add in the company's strong growth prospects, and it could produce powerful total returns in the subsequent rebound.
Robust growth outlook
NYSE: BIPC
Key Data Points
Brookfield Infrastructure is a world leader in infrastructure. It operates utilities, midstream, transportation, and data assets. These businesses generate very stable cash flow to support the company's supercharged dividend. Brookfield Infrastructure currently yields 5.3%, putting its payout several times above the S&P 500's yield.
The company has done a stellar job growing its earnings and dividends over the years. Since its formation in 2009, Brookfield Infrastructure has grown its funds from operations (FFO) per share at a 15% compound annual rate. That has supported 10% compound annual dividend growth.
Brookfield Infrastructure expects to grow its FFO per share by more than 10% annually over the next several years. That supports its belief that it can deliver 5% to 9% annual dividend growth.
The company expects a trio of organic growth drivers (inflation-indexed rate increases, volume growth as the global economy expands, and expansion projects) to fuel 6% to 9% annual FFO per share growth. Brookfield Infrastructure expects its accretive capital recycling strategy to drive its FFO growth rate into the double digits. The company has an exceptional track record of selling mature businesses and redeploying the proceeds into higher-returning opportunities.
The company expects to sell $2 billion of assets this year ($1.2 billion of which it has already secured). That will give it the cash to deploy into new opportunities. It recently increased its stake in its integrated Brazilian rail and logistics provider and agreed to buy a portfolio of telecom towers in India. Meanwhile, the company noted that it's screening a large pipeline of early stage mergers and acquisitions opportunities that could drive compelling returns.
Market sell-offs are always opportunities for Brookfield. In the past, it has capitalized on them by repurchasing its shares and buying stocks of companies it wants to acquire, often leading to deals. Meanwhile, sell-offs are opportunities for investors to buy shares of this high-quality company at a lower price, positioning them to generate more dividend income and earn higher total returns in the future.
These stocks should be near the top of your sell-off buy list
NextEra Energy and Brookfield Infrastructure are great dividend stocks. They offer above-average yields and have delivered above-average dividend growth over the last decade. They have plenty of power to continue increasing their payouts in the future. Because of that, they're great dividend stocks to buy during market sell-offs. Investors can lock in higher yields, positioning them to collect even more dividend income.
