The stock market has been red-hot over the past year, setting several new all-time highs. That might make it easy to forget the tough times of the past.
Unfortunately, the market will eventually go through more storms in the future. Because of that, investors should look for ways to safeguard their portfolios ahead of future downturns. Enterprise Products Partners (EPD 0.45%), Brookfield Infrastructure (BIP 0.30%)(BIPC +0.00%), and Brookfield Renewable (BEP +2.03%) (BEPC +0.00%) stand out to a few Fool.com contributors for their resilient dividends. Here's why they think investors should buy these high-quality, high-yielding dividend stocks ahead of the next market downturn to add a safety net to their portfolio.
The world needs Enterprise
NYSE: EPD
Key Data Points
Reuben Gregg Brewer (Enterprise Products Partners): The key story for Enterprise Products Partners is that it owns a massive collection of energy infrastructure in North America. The list of assets includes pipelines, storage, transportation, and processing facilities. The midstream business basically helps connect the energy sector's upstream (production) to the downstream (chemicals and refining) and the rest of the world. The North American energy sector wouldn't work without businesses like Enterprise.
The key for investors, however, is that Enterprise is basically just a toll taker, charging fees for the use of its vital energy-infrastructure assets. Thus, demand for energy is more important than the price of the commodities flowing through the master limited partnership's (MLP's) system. Energy is the lifeblood of the modern world, so demand tends to remain robust even when energy prices are low or economic activity falls off. This is how Enterprise has managed to increase its distributions for 25 consecutive years despite the inherent volatility of energy prices.
Now add in an investment grade-rated balance sheet and the fact that distributable cash flow covers the distribution by 1.7 times. There's a lot of leeway for bad news here before a distribution cut would be in the cards. And, here's the best part, the distribution yield is a huge 7.2%. Sure, the yield will likely make up the lion's share of investor returns, but if you are trying to maximize the income your portfolio generates (in good markets and bad ones), that shouldn't be a problem for you.
Designed for durability
NYSE: BIPC
Key Data Points
Matt DiLallo (Brookfield Infrastructure): Brookfield Infrastructure produces very stable cash flow. The company operates a globally diversified portfolio of essential infrastructure businesses. About 90% of its cash flow comes from long-term contracts or regulated frameworks with an average remaining term of 10 years. Meanwhile, 70% of its cash flow has no volume or price exposure, while another 20% only has volume risk. Finally, 85% of its earnings are either indexed to or protected from inflation. Those features help insulate Brookfield's earnings from future storms.
The company further fortifies its business from future downturns by maintaining a strong financial position. Brookfield has an investment-grade balance sheet with primarily long-term, fixed-rate debt. It also has ample liquidity, which it consistently bolsters through strategic capital recycling. This strategy enhances growth while maintaining its financial security.
Brookfield pays investors 60% to 70% of its stable cash flow via a dividend yielding over 4.5%. The company expects to grow its high-yielding payout by 5% to 9% annually. It has a lot of visibility into its future growth. The company sees a trio of organic drivers (inflation-indexed rate increases, volume growth as the global economy expands, and its large backlog of capital projects) powering 6% to 9% annual growth in its funds from operations (FFO) per share.
The infrastructure company believes it can boost its FFO growth rate above 10% per share each year by making acquisitions funded through its capital-recycling strategy. While it can make value-enhancing deals in any market environment, it has a knack for capitalizing on market downturns to secure needle-moving investment opportunities.
Brookfield Infrastructure built a financial fortress to endure market storms. Because of that, it should have no problem supplying investors with a growing stream of dividend income in the future, no matter what's going on in the global economy.
This high-yielding payout should steadily rise
NYSE: BEPC
Key Data Points
Neha Chamaria (Brookfield Renewable): Brookfield Renewable (the clean energy-focused sibling of Brookfield Infrastructure) is popular among income investors for two reasons: It offers a high-dividend yield and backs its yield with steady-dividend growth. The renewable energy giant has not only paid a regular dividend since it was formed in 2011 but has also increased its payout every year since. While units of the partnership yield 5%, shares of the corporation -- which was formed in 2019 -- yield 4.5%.
Brookfield Renewable's dividends are bankable because of the company's business model, growth targets, and commitment to shareholders. Brookfield Renewable is one of the largest publicly traded renewable-energy companies in the world with a massive portfolio of assets spread across 20 countries. The company generates almost 90% of its cash flows from long-term contracts, which simply means it can generate stable cash flows even during challenging times. That explains why Brookfield Renewable can also steadily grow its dividends and provide investors with a reliable source of passive income at all times.
To put some numbers to that, Brookfield Renewable expects to grow its funds from operations per unit by 10% annually between 2023 and 2028 and its annual dividend by 5% to 9% in the long term. If the company can hit dividend growth of high single-digit percentages and maintain a dividend yield of 4% plus, investors can earn double-digit annualized-total returns from the stock. That makes Brookfield Renewable one of the top dividend stocks to buy now, especially if you're looking to add stocks that can safeguard your portfolio from future shocks.
