Most top dividend stocks strive to boost their payments at least once a year. However, some companies are even more generous. They aim to give their investors a raise every single quarter. That enables investors to collect a very steadily rising income stream.
Clearway Energy (CWEN.A -1.01%) (CWEN -1.11%), Energy Transfer (ET -0.51%), and W.P. Carey (WPC 0.38%) have been hiking their high-yielding payouts each quarter for the past few years. While future payments are not guaranteed, these look like ideal stocks to buy to collect a very steadily rising stream of passive income.
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A powerful plan to grow its dividend
Clearway Energy currently pays a $0.4384 per-share dividend ($1.75 annualized). The clean energy company has a 5.7% dividend yield at its current rate and share price. The company generates very stable cash flow by selling clean energy to utilities and large corporate customers under long-term, fixed-rate power purchase agreements (PPAs).
The company has been raising its dividend each quarter (it hiked its payout by 1.7% last quarter), and it's targeting to pay a total of $1.76 per share in dividends this year. It aims to deliver 6.5% dividend-per-share growth next year and raise its payment in the bottom half of its 5%-8% long-term target range in 2027.
Powering Clearway's growing dividend is its investments to expand its clean energy portfolio. For example, it recently bought an operational solar farm in California and a wind farm in Washington. The company also agreed to re-power the Mt. Storm Wind project in West Virginia by installing larger turbines. It will sell the power from that project to Microsoft under a 20-year PPA. The company uses its post-dividend free cash flow and balance sheet flexibility to fund growth investments.
Lots of fuel to increase its lucrative payout
Energy Transfer currently pays a quarterly distribution of $0.3275 per unit ($1.31 annualized). That gives the master limited partnership (MLP) a 7.3% yield at its recent unit price and distribution level. The energy midstream company aims to raise its distribution by $0.0025 per unit each quarter ($0.01 annualized), which works out to a 3% to 5% annual growth rate.
The MLP, which sends its investors a Schedule K-1 federal tax form each year -- so unitholders will have a little extra paperwork -- generates very stable cash flow because fee-based assets supply about 90% of its annual earnings. Energy Transfer aims to distribute a little more than half of its stable earnings to investors, retaining the rest to invest in growing its operations and maintaining a rock-solid financial profile.
Energy Transfer is investing about $5 billion into growth capital projects this year, which should come online through the end of next year. Those expansions will supply it with incremental sources of cash flow as they enter commercial service. It has many more projects under development that it could approve in the future.
Meanwhile, its strong balance sheet gives it the financial flexibility to make accretive acquisitions as opportunities arise. It bought WTG Midstream last year in a $3.3 billion deal that will add $0.04 per unit to its cash flow this year, increasing to $0.07 per unit by 2027. The company's growth investments give it the fuel to raise its payout each quarter.
Dual dividend growth drivers
W.P. Carey recently raised its dividend payment to $0.89 per share ($3.56 annualized). The real estate investment trust (REIT) has a 5.7% yield at its current payout level and share price. The landlord has been increasing its payment every quarter since resetting its dividend in 2023 when it exited the office sector by selling and spinning off those properties. It raised its payment by $0.005 per share each quarter last year and has been hiking it by $0.01 per share each quarter this year.
Two factors drive W.P. Carey's steadily rising dividend. The REIT invests in single-tenant industrial, warehouse, retail, and other properties secured by long-term net leases with built-in rent escalation. About half of its leases tie rental rates to inflation, while most of the remaining contracts raise rents at a fixed annual rate. These leases supply it with very stable and steadily rising rental income.
In addition, W.P. Carey uses its post-dividend free cash flow, non-core assets sales, and balance sheet flexibility to buy additional income-producing properties secured by leases with built-in rental escalation. This strategy supplies it with a growing income stream to support its steadily rising dividend.
Get paid more each quarter
Clearway Energy, Energy Transfer, and W.P. Carey have been raising their dividend payments each quarter. That's adding to their already lucrative income streams. It makes them ideal dividend stocks to buy for those who want to collect a very steadily rising stream of passive income.
