Top dividend stocks share one thing in common. They regularly increase their payments. That's evident by digging into the data. Over the last 50 years, dividend growers have significantly outperformed companies with no change to their dividend payment (10.2% average annual total return compared to 6.7%, according to data from Ned Davis Research and Hartford Funds).
Brookfield Infrastructure(NYSE: BIPC)(NYSE: BIP), NextEra Energy(NYSE: NEE), and Oneok(NYSE: OKE) have solid records of increasing their dividends. They also have excellent growth prospects, which bode well for their ability to continue growing their payouts. Add in their higher yields, and they stand out as top dividend stocks to buy this month.
Capitalizing on a massive growth tailwind
Brookfield Infrastructure recently increased its dividend by 6%. "This marks the 16th year of consecutive distribution increases within or above our target range [5%-9% annually]," wrote CEO Sam Pollock in his fourth-quarter letter to investors. That raise nudged the global infrastructure operator's dividend yield above 4%, putting it well above the S&P 500's 1.2% yield.
The company has several growth drivers, including inflation-linked rate increases, volume growth as the global economy expands, capital projects, and acquisitions. Brookfield entered this year with a record backlog of organic capital projects and a significant development pipeline. A large percentage of the projects are related to expanding its data infrastructure platform. It's funding two U.S. semiconductor fabrication facilities and a large pipeline of data center developments around the world.
"As projects come online, we expect them to contribute meaningfully to earnings and drive overall growth over the next three years," wrote Pollock in the fourth-quarter letter. Brookfield also currently has the deepest pipeline of early stage acquisition opportunities in years.
The company's growth catalysts position it to deliver on its aim of growing its funds from operations (FFO) at a more than 10% annual rate. With a strong balance sheet and a conservative dividend payout ratio of 67% of its FFO (well within its 60% to 70% target range), Brookfield should have no trouble continuing to increase its dividend.
The powerful growth should continue
NextEra Energy has a long history of delivering above-average dividend growth. The utility has increased its payout at a roughly 10% compound annual rate over the last 20 years. That's much faster than its peers, powered by its robust earnings growth rate (8.9% compound annual average adjusted earnings-per-share growth over the past two decades compared to 3.8% for its peers).
A big factor powering the company's above-average growth is its focus on building renewable energy projects. It's the world's leader in renewables and storage.
NextEra Energy currently has a large and growing backlog of renewable energy projects. It's on track to operate a roughly 75-gigawatt renewable energy portfolio by 2027, "which would be larger than the installed renewables capacity of all but seven countries," noted CEO John Ketchum on the fourth-quarter earnings conference call. The company's renewables-powered growth has it on track to increase its adjusted earnings per share at or near the top end of its 6% to 8% growth target range through 2027. That growth and a lower dividend payout ratio support its plan to increase its 3%-yielding dividend by around 10% annually through at least 2026.
Continuing to add fuel to the dividend growth engine
Oneok has delivered dividend stability and growth for more than a quarter century. While the pipeline stock hasn't increased its payment every single year, it has nearly doubled its dividend payment over the past decade -- compared to dividend cuts from all its closest peers. The company is currently targeting to increase its dividend, which yields 4.2%, by 3% to 4% per year.
Acquisitions are a major near-term growth driver for Oneok. The company closed its transformational $18.8 billion acquisition of Magellan Midstream Partners in 2023. It expects that deal to add an average of more than 20% to its free cash flow per share through 2027, driven in part by capturing at least $200 million of synergies each year. Oneok followed that up by spending $5.9 billion last year on accretive deals to buy Medallion Midstream and a 43% interest in EnLink. It subsequently closed the purchase of the remaining stake in EnLink this year in a stock exchange transaction.
Oneok also has a growing backlog of organic expansion projects. It recently formed a joint venture with MPLX to build a liquified petroleum gas export terminal along the Gulf Coast and an associated pipeline. The company will invest $1 billion into those projects, which should enter commercial service in 2028. It's also expanding its Elk Creek NGL Pipeline, expanding its refined products capacity to the Denver area, and rebuilding an NGL fractionator in Oklahoma. These projects should come online and supply incremental earnings and cash flow over the next several years, adding to its ability to continue increasing its dividend.
Top-notch dividend growth stocks
Brookfield Infrastructure, NextEra Energy, and Oneok have done excellent jobs growing their dividends over the years. They expect to continue increasing their higher-yielding payouts in the future. That dividend growth makes them stand out as some of the top dividend stocks to buy this month since it could give them the fuel to produce above-average total returns over the long haul.
Should you invest $1,000 in NextEra Energy right now?
Before you buy stock in NextEra Energy, 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 NextEra Energy 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 $788,619!*
Now, it’s worth notingStock Advisor’s total average return is929% — a market-crushing outperformance compared to177%for the S&P 500. Don’t miss out on the latest top 10 list.
Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, and NextEra Energy. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Brookfield Infrastructure Partners and Oneok. The Motley Fool has a disclosure policy.
