It's getting harder to find great income-producing stocks these days. Companies just don't pay dividends like they used to, with many hoarding cash or buying back stock instead of sending quarterly checks back to investors. Because of that, and the fact that the market continues to set records, the average dividend yield of stocks in the S&P 500 is down to just 1.85%, which is less than half the historical average.
However, while there are fewer options available, there are still some compelling dividend payers out there. Three excellent choices with yields above 4% are Enbridge (NYSE: ENB), Brookfield Property Partners (NYSE: BPY), and Occidental Petroleum (NYSE: OXY). Here's a look at what makes this trio stand out from the crowd.
Let the dividends flow to you
Canadian energy infrastructure behemoth Enbridge should top any income-seekers' list these days. Thanks to a 15% dividend increase earlier this year and a head-scratching double-digit slide in its stock price, this pipeline giant currently offers a desirable dividend yield right at 5%. Further, that payout is on solid ground since Enbridge backs it with stable cash flow -- 96% comes from predictable sources like fee-based contracts, and the company only pays out about half that cash in dividends each year.
However, Enbridge's current yield is only part of the draw. The other is that the company plans to increase it by a 10% to 12% annual rate all the way through 2024. Backing that view is a whopping 31 billion Canadian dollars' ($24.4 billion) worth of primarily fee-based expansion projects it has underway, which should steadily increase cash flow and its ability to grow the dividend. That visible growth makes Enbridge an excellent income stock to hold for the long term, since investors get a rapidly growing income stream with upside as the stock rises in value along with its cash flow.
Cashing the rent checks without doing any work
Global real estate partnership Brookfield Property Partners also offers investors an attractive payout today with visible growth over the next several years. At the moment, the real estate giant yields about 5.2%, and it has plans to increase that payout at a 5% to 8% annual rate over the long term.
Driving that growth is Brookfield's three-fold plan to maximize the value of its vast real estate holdings. First, the company expects to grow earnings by 2% to 3% per year via built-in rent increases on existing leases and by signing new contracts for higher rates. Second, the company has several billion dollars of new construction and redevelopment projects underway that should grow its earnings capacity. Finally, it plans to sell about $1 billion of properties each year and reinvest the proceeds into higher-return opportunities. These factors should combine to drive 8% to 11% annual cash flow growth, which should easily support mid-single-digit yearly dividend increases.
Pumping out a hefty dividend even at lower oil prices
U.S. oil giant Occidental Petroleum currently yields an attractive 4.8%, which is much higher than the average oil company. One reason is that many of its rivals slashed their payouts during the recent oil market downturn to conserve cash flow. However, instead of cutting its payout, Occidental continued increasing its dividend, recently notching its 15th consecutive annual increase. Several factors fueled Occidental's ability to keep boosting the payout, including its top-tier balance sheet and the overall stability of cash flow due to the makeup of its portfolio, which gave it the financial resources to continue investing in growth projects even as oil slumped.
Occidental Petroleum remains committed to raising its payout each year, though it doesn't offer the same visibility into future increases as Brookfield or Enbridge. However, the company is currently working to get itself to the point where it can pay its current dividend and generate enough excess cash to grow oil and gas production by 5% to 8% annually as long as oil is around $50 a barrel. Once Occidental reaches that point, it will likely be able to increase the dividend at a rate that matches production growth. In addition to that growing income stream, Occidental Petroleum also offers investors untapped upside to a recovery in oil prices since its cash flow would skyrocket if crude heads higher, likely taking its stock up with it.
The best of both worlds
What makes Enbridge, Brookfield Property Partners, and Occidental Petroleum such compelling stocks to buy today aren't just their above-average yields, but the fact that all three expect to increase those payouts each year. Because of that, income-seekers can collect steadily growing cash flow streams alongside healthy capital gains as their stock prices rise in value alongside earnings. That income with upside could quickly compound wealth for investors, making them glad they didn't settle for just any high-yielding stock.
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