Dividend stocks can be a great way to generate durable passive income. Many companies have long histories of paying stable and steadily rising dividends. That makes them great income investments for the long haul.
Brookfield Renewable (BEP -0.47%) (BEPC -0.08%), Enbridge (ENB -0.97%), and Southern Co. (SO -0.89%) stand out for paying durable and growing dividends. That's one of the many reasons they are great dividend stocks to buy now for years of passive income.
Plenty of power to continue pushing its payout higher
Brookfield Renewable has increased its dividend by at least 5% annually for the last dozen years. That steady upward trend should continue in the decades ahead.
Powering the company's growing dividend is its leading global renewable energy platform. Brookfield's hydroelectric, wind, solar, and energy storage assets generate very predictable cash flow backed by long-term, fixed-rate power purchase agreements (PPAs) with utilities and large corporations. That provides the stable cash flow foundation for its 5.1%-yielding dividend.
Brookfield Renewable expects to grow its predictable cash flow by more than 10% annually through at least 2028. Four catalysts power that plan: inflation escalation, margin enhancement, development projects, and acquisitions.
The company's PPAs contain inflation-linked annual rate escalation clauses that should grow its cash flow each year. Meanwhile, rising power prices should further increase its margins as legacy contracts expire and it signs new ones at higher market rates. Brookfield also has a vast development pipeline and an excellent track record of completing value-enhancing acquisitions. The company's visible growth profile supports its view it can increase the dividend at a 5% to 9% annual rate over the long term.
Slowly transitioning with the rest of the world
Enbridge has paid dividends to its shareholders for over 68 years. The Canadian pipeline and utility company has increased its payout for the last 28 consecutive years. That growth should continue in the future.
The company's low-risk business model generates lots of stable cash flow, backed by long-term contracts and regulated rate structures. That gives it the cash to pay dividends (currently yielding 7.7%) and invest in expanding its portfolio.
Enbridge has focused its investments in recent years on lower-carbon opportunities like natural gas pipelines, natural gas utilities, and renewable energy projects. The company recently agreed to buy three natural gas utilities in a deal that will shift its earnings mix even more toward lower-carbon energy while increasing the overall stability of its earnings profile. The acquisition will also add to Enbridge's extensive pipeline of lower-carbon capital projects.
The company has secured capital projects that should come online through 2028. Meanwhile, it has more investment opportunities in its development pipeline. These projects drive Enbridge's view that it can grow its earnings by around a 5% annual rate over the medium term. That should enable it to continue increasing its dividend.
Reaching an inflection point
Southern Co. has paid a dividend equal to or greater than the prior quarter's level for 75 straight years. Meanwhile, it has increased its payment for the last 22 straight years. That resiliency should continue in the future.
The electric and gas utility generates very predictable cash flow backed by regulated rate structures. That provides the foundation for its 4%-yielding dividend. The company also retains some of its stable cash flow to invest in expanding its operations.
Southern Co. is in the process of completing one of its largest projects. It invested over $10 billion to build two new nuclear power-generating units. The first unit came online earlier this year, and the second one should start commercial operations in early 2024.
The company expects the two units to increase its cash flow from operations by about $700 million annually. That will give it more cash to pay dividends and invest in additional expansion projects, including building a commercial renewable energy business. Those investments should continue to grow Southern Co.'s earnings, giving it more power to pay dividends.
Durable dividend payers
Brookfield Renewable, Enbridge, and Southern Co. have very low-risk business models that generate lots of stable cash flow. That gives them the money to pay dividends and invest in expanding their operations. Their focus on capitalizing on the clean energy megatrend should grow their earnings, enabling these companies to continue increasing their payouts over the long term. These features make them great income stocks to own in the decades ahead.
Matthew DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners, and Enbridge. The Motley Fool has positions in and recommends Brookfield Renewable and Enbridge. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
