Dividend-paying stocks can be great investments. They can enable you to generate some passive income, providing a real return. In addition, dividend stocks have historically produced strong total returns as they've grown their earnings and shareholder payouts, driving stock price appreciation.
Brookfield Infrastructure(NYSE: BIPC)(NYSE: BIP), PepsiCo(NASDAQ: PEP), and Prologis(NYSE: PLD) currently stand out among dividend stocks. The trio has excellent records of paying growing dividends. On top of that, they currently offer attractive yields of more than 3%, partly due to drops in their stock prices this year. Because of that, they offer compelling blends of dividend income and upside potential.
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Down despite its robust growth prospects
Shares of Brookfield Infrastructure have declined by nearly 10% from their 52-week high. That slump has pushed the global infrastructure company's dividend yield up to 4.2%. The company's stock price has also slumped, even though it's having another good year, and its funds from operations (FFO) rose 5% in the first quarter, powered by inflation-driven rate increases, recently completed expansion projects, and acquisitions closed in the past year.
Brookfield Infrastructure has a terrific record of paying dividends. It has increased its payment in all 16 years since its formation, growing it at a 9% compound annual rate.
The company expects to continue increasing its payout in the future, targeting 5% to 9% annual growth. It sees a trio of organic growth drivers (inflation-driven rate increases, volume growth as the global economy expands, and expansion projects), increasing its FFO per share by 6% to 9% per year. On top of that, the company has an excellent record of making accretive acquisitions funded by recycling capital. It recently agreed to invest $500 million in the acquisition of Colonial Enterprises, which owns a leading U.S. refined products pipeline system.
It also partnered with GATX Corporation to buy Wells Fargo's rail operating lease portfolio (consisting of 105,000 railcars) for $4.4 billion. It's also acquiring Wells Fargo's rail finance lease portfolio (23,000 railcars and 440 locomotives) in a separate deal. Brookfield estimates that acquisitions like these will help push its FFO growth rate above 10% annually.
Continuing to satisfy investors with a growing dividend
PepsiCo stock has slumped more than 25% from its 52-week high. That plunge has propelled its dividend yield to 4.4%. That's a tasty level for a company with a long history of satisfying investors' cravings for more dividend income.
The food and beverage giant recently increased its dividend payment by another 5%. That extended its growth streak to 53 straight years, enough to qualify PepsiCo as an elite Dividend King.
PepsiCo's stock is down due to concerns that tariffs, a slowing economy, and changing consumer tastes will impact the company's growth. On the one hand, the company is seeing some impact from those headwinds this year. It now expects its earnings per share to be at the same level as last year's, compared to the mid-single-digit growth rate it initially expected.
However, the company has a resilient business and expects its growth to reaccelerate in the coming years. It has been investing heavily in the strategic transformation of its portfolio to healthier food and beverage options, including buying Poppi, Siete, and Sabra in recent quarters. These investments should pay dividends for the company in the coming years by reigniting its earnings growth engine, which should enable PepsiCo to continue increasing its dividend.
Executing well despite some headwinds
Prologis stock has slumped more than 15% this year. That sell-off has helped nudge its dividend yield up to 3.7%. The leading industrial real estate investment trust (REIT) has been under some pressure due to slowing demand for warehouse space.
However, the company is still performing well amid all the uncertainty. Its core FFO per share increased 11% in the first quarter as it continues to sign new leases at much higher rates compared to the price point of expiring contracts on the same space.
Meanwhile, the long-term demand picture for warehouse space remains robust. "Over the long term, limited new supply and high construction costs support continued rent growth," commented CEO and co-founder Hamid Moghadam in the first-quarter earnings press release. That should enable the company to capture higher rental rates on its existing properties and continue developing new warehouses. In addition, Prologis is using some of its land to build data centers to capitalize on the growing demand for these properties to support increased digitalization and AI technology.
Prologis' growth prospects should enable the REIT to continue increasing its dividend.It has grown its payout at a 13% compound annual rate over the past five years. That's faster than the S&P 500 (5%) and REIT sector average (6%).
Strong total return potential
Brookfield Infrastructure, PepsiCo, and Prologis offer investors the best of both worlds. They pay dividends that yield more than double the S&P 500's average (less than 1.5%), and they have compelling upside potential from their earnings growth and an eventual recovery in their stock prices. Because of that, they could produce strong total returns from here, making them great dividend stocks to buy right now.
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Wells Fargo is an advertising partner of Motley Fool Money. Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, PepsiCo, and Prologis. The Motley Fool has positions in and recommends Prologis. The Motley Fool recommends Brookfield Infrastructure Partners and recommends the following options: long January 2026 $90 calls on Prologis. The Motley Fool has a disclosure policy.
