Most dividend-paying stocks tend to grow more slowly. They often pay dividends because they lack valuable reinvestment opportunities for their cash.
However, some dividend stocks break that mold by offering a high dividend yield and above-average growth prospects. Three companies that combine revenue and growth are Brookfield Renewable Power (NYSE: BEP)(NYSE: BEPC), Brookfield infrastructure (NYSE: BIP)(NYSE: BIPC), and NextEra energy partners (NYSE: NEP). For this reason, this trio has the fuel to produce overwhelming total returns for the market in the years to come.
A powerful growth engine
Brookfield Renewable is a global leader in renewable energy. The company operates a diverse portfolio of renewable power generation facilities that sell their electricity to end users such as utilities under long-term fixed rate contracts. This allows the business to collect a constant stream of cash flow. It returns part of this liquidity to investors via a dividend which currently yields around 3%, i.e. more than double the S&P 500is average.
On its own, Brookfield’s existing portfolio is on track to expand its FFO (operating funds) per share from 3% to 6% per year until at least 2025. This projection is fueled by a combination of inflation-linked rate increases on its existing contracts, higher electricity rates when existing agreements expire, and its ability to reduce charges. Meanwhile, the company also expects its investments in new renewable energy development projects to grow 3-5% of its FFO per share each year, funded by retained cash flow and its premier balance sheet. plan. Finally, Brookfield estimates that future acquisitions will add up to 9% additional annual FFOs per share. Add it all up and Brookfield could increase the FFO by 20% per share each year through 2025. This forecast suggests that it can easily support its plan to increase its dividend at an annual rate of 5-9%.
Lots of fuel sources
Brookfield Infrastructure, the sister company of Brookfield Renewable, is a global leader in operating critical infrastructure businesses. It is one of the largest owners and operators of infrastructure networks that support the movement and storage of energy, water, freight, passengers and data. Most of these activities generate relatively stable cash flows backed by long-term, fixed-rate contracts. This gives it the cash flow necessary to maintain a dividend of almost 3.8%.
Brookfield believes it can organically increase its FFO per share by 6% to 9% per year. Several catalysts are fueling these forecasts, including inflation-linked contract rate increases, cost reduction initiatives, volume growth as the global economy grows, and expansion plans. On top of that, Brookfield estimates that future acquisitions may add an additional 1% to 5% to its FFO per share each year, funded primarily by the sale of slower growing mature assets. The company is already work on his next deal. That’s up to 14% annual growth over the next few years. This outlook puts Brookfield on the right track with its plan to increase its dividend from 5% to 9% per year.
An overloaded dividend growth plan
NextEra Energy Partners operates a fast growing clean energy business. She holds a portfolio of natural gas pipelines, wind farms and solar energy-production facilities backed by long-term fixed-rate contracts. These deals provide it with relatively stable cash flow to support its 3.4% dividend.
The company expects to increase this already attractive payout at an annual rate of 12-15% until at least 2024. The basis of this plan is the company’s ability to acquire additional clean energy assets. The main source of the deal is its parent company, the utility giant NextEra Energy, although the company also plans to enter into transactions with third-party sellers. NextEra Energy Partners plans to fund future transactions by combining cash flow retained after paying its dividend with creative financing structures from institutional investors.
Have your proverbial cake and eat it too
Brookfield Renewable, Brookfield Infrastructure and NextEra Energy are not your average dividend paying stocks. This trio offers high returns as well as high growth potential. This double blow should enable them to generate above-market total returns for years to come, making them ideal dividend-paying stocks for any portfolio.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.