I have one investing principle when it comes to buying dividend stocks: Do not chase yields. That's because the best dividend stocks don't necessarily offer big yields, but all of them pay regular dividends and have a long-term dividend track record. Even better, top dividend stocks increase their payouts over time, returning a larger portion of the incremental cash they generate as they grow.
I found four such rock-solid dividend stocks you'd want to double up on right now to earn passive income for years to come.
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A 6.7% yield with embedded dividend growth
Enterprise Products Partners (EPD -0.27%) is one of the best dividend stocks in the energy space. It is also on the cusp of establishing multiyear cash-flow growth, making it an opportune time to load up some shares.
Enterprise Products is one of the largest midstream energy companies in the U.S. and has increased its dividend for the past 26 consecutive years. It stores and transports crude oil and other products for a fee under long-term contracts and, therefore, generates steady cash flows that are insulated from the fluctuations in oil and gas prices. In recent years, Enterprise Products has relied heavily on organic cash flows to fund dividends. With its distributable cash flows covering dividends by at least 1.5 times since 2018, the stock's total returns have grown rapidly since, even doubling shareholders' money.
Enterprise Products is nearing the completion of a major multiyear $7.6 billion expansion program, with projects worth nearly $6 billion slated to come online this year. With large capital expenditures behind it, Enterprise Products should have more cash to return to shareholders even as new projects start contributing to its bottom line. It should be a win-win for shareholders who buy the oil stock, which also yields a hefty 6.7%.
Top dividend bet in a booming industry
The International Energy Agency projects global renewable electricity generation to jump by 90% by 2030 from 2023. One company that could hugely benefit from this renewable energy boom is Brookfield Renewable (BEPC 1.11%) (BEP 0.34%), one of the largest publicly listed renewable-energy companies in the world.
Brookfield Renewable's biggest strength is its diversified portfolio spanning five continents with extensive operations in wind, solar, hydropower, and distributed energy. That perfectly positions the company to exploit growth opportunities not just in the U.S., but also in regions like Europe, South America, and the Asia-Pacific.
Brookfield Renewable's business is also durable since it sells electricity under long-term contracts, now averaging a life of 14 years. Nearly 90% of the company's operating cash flows are contracted, which is primarily why Brookfield Renewable's dividends are also safe. There's a solid reason you should consider buying the stock now -- it is targeting 5% to 9% growth in its annual dividend over the long term, backed by over 10% growth in funds from operations. The shares also yield a solid 5%.
This stock has big dividend plans through 2029
American Water Works (AWK -1.54%) is one of the finest dividend stocks you could own. It yields only 2.3%, but its dividend stability and growth are one of the best among all the publicly listed stocks in the Unites States. The proof lies in numbers.
American Water Works has increased its dividend every year since 2009, compounded it at an annual growth rate of nearly 8.5% over the past five years, and aims to grow its annual dividend by 7% to 9% through at least 2029, backed by similar growth in earnings while maintaining a payout ratio of 55% to 60%. That's a solid dividend profile for any company, and American Water Works could easily meet its goals since it provides an essential service -- water.
American Water Works is, in fact, the largest regulated water and wastewater utility in the U.S., serving over 14 million people across 14 states. The company also serves 18 military bases. With the water giant planning to spend nearly $42 billion over the next decade to drive rate base growth, investors looking for a steady stream of income should double up on this magnificent dividend stock now.
A hugely underrated dividend stock
Parker-Hannifin (PH -0.71%) is one of the lesser-known dividend stocks that I really like because of its unbeatable dividend history and long-term goals.
Parker-Hannifin is one of the largest motion and control technology companies in the world. Its products typically power heavy machinery and ensure they run smoothly, and are therefore critical for several industries, especially aerospace, defense, manufacturing, and transportation. Since several of its products and services are interconnected, Parker-Hannifin also prides itself in customer stickiness: Nearly two-thirds of its revenue comes from customers who typically buy at least four of its technologies.
You may be surprised to know about Parker-Hannifin's dividend history, and what a magnificent performer its stock has been in recent years.
Parker-Hannifin has one of the longest dividend-increase streaks among the S&P 500 stocks. It has paid a dividend for 300 consecutive quarters now and raised its dividend every year for the past 69 consecutive years, including a 10% increase in April. Parker-Hannifin expects its adjusted earnings per share to grow at a compound annual growth rate of over 10% through 2029, which should support bigger dividends. So even though the stock yields only 1%, its stable and growing dividends could make you rich in the long term.
