Investing in dividend stocks can be a fantastic way to generate passive income. Many high-quality companies offer higher-yielding payouts. Furthermore, several of these top-notch income producers steadily increase their payouts yearly, making them better than the fixed income you could earn from a bond.

Brookfield Renewable (NYSE: BEPC)(NYSE: BEP), Kinder Morgan (NYSE: KMI), and Vici Properties (NYSE: VICI) stand out as great income stocks to buy right now. They all offer dividend yields of at least 5%, putting them several times higher than the S&P 500's sub-1.5% dividend yield. Meanwhile, they have solid records of increasing their payouts each year, which seems very likely to continue.

A high-powered income stream

Brookfield Renewable is one of the world's leading renewable power producers. It has a globally diversified portfolio of hydro, wind, and solar energy assets that generate clean electricity. It sells that power to utilities and large corporate buyers under long-term power purchase agreements. Those contracts supply the company with stable and growing income (70% link power rates to inflation).

The company pays out a reasonable amount of its stable cash flow to support its high-yielding dividend (less than 75% of its funds from operations (FFO) in the first half of this year). That gives it a nice cushion while enabling it to retain cash to help fund new investments. Brookfield Renewable also has a strong investment-grade balance sheet.

The leading renewable energy company expects to grow its FFO per share by more than 10% annually through at least 2028. Powering that forecast is a combination of inflation-linked rate increases, margin enhancement activities, development projects, and acquisitions. Those catalysts should give it ample power to achieve its plan of increasing its dividend by 5% to 9% each year. Brookfield has raised its payout by at least 5% for 13 straight years.

Lots of fuel to grow this high-yielding dividend

Kinder Morgan operates North America's largest gas pipeline network and other energy infrastructure assets. These businesses generate very stable cash flow. Roughly 68% comes from take-or-pay and hedging contracts, meaning it gets paid a set amount regardless of volumes and market pricing. Fee-based agreements (fixed-price contracts with variable volumes) comprise another 27% of its earnings mix, leaving only 5% of its earnings exposed to commodity prices.

The pipeline giant pays out a little more than half of its stable cash flow in dividends, retaining the rest to fund expansion projects, repurchase shares, and maintain a strong balance sheet. The company currently has $5.2 billion of expansion projects under construction, with half expected to enter service by the end of next year and supply near-term income growth. Kinder Morgan can supplement its solid organic growth rate with accretive acquisitions.

The company's growing cash flows should give it the fuel to continue increasing its dividend. It delivered its seventh consecutive annual dividend increase earlier this year.

A low-risk wager on a growing income stream

Vici Properties is a real estate investment trust (REIT) focused on owning experiential properties like gaming, hospitality, and entertainment destinations. It leases these properties back to the operators under long-term net leases. Those leases supply it with predictable cash flow that rises over time due to contractual rental escalation clauses.

The REIT pays out about 75% of its stable rental income in dividends. It retains the rest to help fund new income-generating real estate investments. It also has a strong balance sheet, giving it additional flexibility to make new investments.

Vici Properties has multiple growth drivers in addition to rent growth. It will acquire experiential properties in sale-leaseback transactions with the operators, buy properties from other investors, and even acquire rival REITs. In addition, it provides partners with funding for development and expansion projects, which can open the door to future property acquisitions.

The company's growing cash flow helps support a steadily rising dividend. Vici Properties has increased its payout in all six years since it came public, growing the dividend at a peer-leading 7.9% compound annual pace.

Top-notch income stocks

Brookfield Renewable, Kinder Morgan, and Vici Properties offer high-yielding dividends that have steadily grown over the years. With strong financial profiles and solid growth prospects, those upward trends should continue. That makes them great stocks to buy right now for passive income.

Should you invest $1,000 in Kinder Morgan right now?

Before you buy stock in Kinder Morgan, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Kinder Morgan wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $792,725!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 22, 2024

Matt DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners, Kinder Morgan, and Vici Properties. The Motley Fool has positions in and recommends Brookfield Renewable, Kinder Morgan, and Vici Properties. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

3 Dividend Stocks Yielding 5% to Buy Right Now for Passive Income was originally published by The Motley Fool