Our Favorite Dividend Stocks for 2022 and Beyond
Dividend stocks have historically been excellent investments. They’ve routinely outperformed nonpayers, with the best returns coming from companies that consistently increase their dividend payments.
Because of that, we’re always on the lookout for great dividend stocks. With that in mind, we asked some of our contributors for their favorite dividend stocks for 2022 and beyond. Here’s why Enbridge (NYSE:ENB), NextEra Energy Partners (NYSE:NEP), and Enterprise Products Partners (NYSE:EPD) rose to the top of their lists.
Image source: Getty Images.
Investing for dividend growth
Reuben Gregg Brewer (Enbridge): North American midstream giant Enbridge just recently announced an annual dividend increase of 3%. That’s not particularly exciting, but over the past 27 years the annualized growth in the dividend is roughly 10%. That’s exciting! The year-to-year increases fluctuate and depend partly on other options for the cash the company generates. For example, the yield is a historically high 6.6% today, so management explained during Enbridge’s third-quarter earnings conference call that it doesn’t feel the company’s dividend growth is being recognized by investors. Thus, putting that cash to work in other ways makes more sense.
This backdrop means that Enbridge is, instead, buying back its shares, which management believes are undervalued, and investing capital into its various businesses. Notably, on the capital investment front, it has been putting an increasing amount of cash into its renewable power operations, which positions it well for the changing future of the energy sector. And while it is doing all of these things, the company’s payout ratio will decline as the business grows and the share count shrinks. That, in turn, will give Enbridge the leeway to jump dividend growth back up again when the market finally recognizes the value on offer here. So, for now, this is a yield story, but it could soon turn back into a dividend growth story. However, if you buy now, you can get both a high yield and dividend growth.
High-powered dividend growth ahead
Matt DiLallo (NextEra Energy Partners): NextEra Energy Partners provides the best of both worlds for dividend investors: income and growth. The clean energy infrastructure company offers an attractive dividend yield. At its current rate of nearly 3.6%, it’s more than double that of the S&P 500.
That payout is on reasonably solid ground. NextEra Energy Partners generates relatively stable income backed by long-term, fixed-rate contracts on its renewable energy assets and natural gas pipelines. It pays out a reasonable amount of this cash flow to support its high-yielding dividend, anticipating a dividend payout ratio in the low 80% range in 2022. On top of all that, it has a solid balance sheet with ample financial flexibility.
Meanwhile, NextEra Energy Partners sees significant growth ahead. The company currently…