I love to collect dividend income. It provides a nice base return no matter what's happening in the stock market. I can use that income to buy more stocks when they're down. Eventually, I hope to generate enough dividend income to live off of during retirement.
I'm almost always buying more shares of high-quality, high-yielding dividend stocks. I've found that the energy sector has an abundance of options. My top three high-yielders to buy right now are Brookfield Renewable (BEPC 1.02%)(BEP 0.58%), Enbridge (ENB +1.03%), and NextEra Energy (NEE 0.13%). They pay attractive dividends backed by high-quality financial profiles, which should enable them to continue steadily increasing their payments in the future.
Ample power to continue raising the payout
NYSE: BEPC
Key Data Points
Brookfield Renewable is a leading global renewable energy producer and sustainable solutions company. It operates hydroelectric, wind, solar, and energy storage assets and has a growing portfolio of sustainable solutions like biofuels production, solar panel manufacturing, and nuclear energy services.
A common theme is that most of its assets generate very stable revenue (90% come from long-term contracts with an average remaining term of 14 years) that index rates to inflation (70%). That provides Brookfield with steadily rising cash flow to support its high-yielding 5.4% dividend.
Brookfield also has a strong balance sheet, which enables it to fund its growth during periods of market volatility. That gives it the funds to complete development projects and make accretive acquisitions. The company believes its various growth drivers will power over 10% annual growth in its funds from operations (FFO) per share for the next several years. That should enable the company to continue increasing its dividend within its 5% to 9% annual target range. Brookfield has hiked its payout by at least 5% annually since 2011.
Plenty of fuel to continue its 30-year streak
NYSE: ENB
Key Data Points
Enbridge operates one of North America's largest energy infrastructure businesses. The company's liquids pipelines, gas transmission and midstream, gas distribution and storage, and renewable power assets generate very stable cash flow. About 98% of its earnings come from predictable cost-of-service or contracted assets.
The pipeline and utility company pays out about 60% to 70% of its stable cash flow in dividends. That payout currently yields 5.7%. Enbridge retains the rest of its cash to invest in expansion projects. It also has a strong investment-grade balance sheet, giving it ample flexibility to fund growth projects and make bolt-on acquisitions as opportunities emerge.
Enbridge currently has a multi-billion-dollar backlog of commercially secured expansion projects under construction. They should come online through the end of the decade. They give the company a clear line of sight to grow its cash flow per share by a 3% compound annual rate through next year and by 5% per year beyond 2026. That should support dividend growth around that same annual rate, giving Enbridge the fuel to extend a streak that's currently up to 30 consecutive years.
High-end growth ahead
NYSE: NEE
Key Data Points
NextEra Energy operates the largest electric utility in Florida. It also generates renewable energy that it sells to other utilities and large corporate power buyers. These businesses produce very stable revenue backed by government-regulated rate structures and long-term contracts.
It pays out a very conservative percentage of its earnings in dividends for a utility. Even with that lower payout ratio, NextEra still offers a relatively higher yield, which was recently around 3.4%. Like Enbridge, NextEra has grown its payout every year for the past three decades.
The utility plans to raise its payment by around 10% annually through at least next year. Thanks to its lower payout rate and strong earnings growth prospects, it can support that dividend growth level. NextEra believes it can increase its adjusted earnings per share at or near the top end of its 6% to 8% annual target range through at least 2027. It has ample growth already lined up and increasing visibility into its longer-term growth potential.
Excellent income producers
Brookfield Renewable, Enbridge, and NextEra Energy are the types of high-yielding dividend stocks I like to buy. They pay high-yielding dividends backed by stable cash flows and strong financial profiles. They also have an excellent track record of increasing their dividends, which is highly likely to continue in the coming years. These features make them stand out as my top dividend stocks to buy right now.
