Dividend stocks are my favorite investments. They produce passive income that I can reinvest. On top of that, dividend stocks historically produce higher total returns than non-payers, with much less volatility.
There are a lot of great dividend stocks out there. Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP) and Enbridge (NYSE: ENB) are two of the top ones. They pay high-yielding dividends that steadily rise. With more growth ahead, they’re excellent dividend stocks to buy this December.
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Brookfield Infrastructure has increased its dividend every year since its formation 15 years ago. The global infrastructure operator has grown its payout at a 9% compound annual rate over that time frame. It currently offers investors a nearly 4% dividend yield, which is more than three times higher than the S&P 500 (SNPINDEX: ^GSPC) (1.2% yield).
The company pays a well-supported dividend. It generates very stable cash flow, with 90% contracted or regulated (70% of which has no volume or price exposure) and 85% either indexed to or protected from inflation. Brookfield expects its dividend payout ratio will be around 67% of its funds from operations (FFO) this year, putting it within its 60%-70% target range. The company also has a strong investment-grade balance sheet with lots of liquidity.
Brookfield’s dividend is only part of the equation. The company also expects to continue growing its FFO at a more than 10% annual rate. It has several organic growth drivers, including inflation-linked rate increases, volume growth as the global economy expands, and development projects. It currently has a record backlog of $8 billion of projects (data centers, semiconductor fabrication facilities, utility connections, and midstream expansions) and over $4 billion of additional projects in development.
On top of that, the company expects to continue completing accretive M&A transactions. Its current deal pipeline is as big as it has been in two years and continues to grow.
These drivers should enable Brookfield to grow its dividend by 5% to 9% each year.
Enbridge recently reached a notable milestone. The Canadian pipeline and utility operator has increased its dividend for 30 straight years. It currently offers an even higher dividend yield of more than 6%.
The company has one of the lowest-risk business models in the energy sector. About 98% of its earnings come from stable cost-of-service or contracted assets, while 80% have inflation protections. That enables the company to deliver very predictable earnings. It’s on pace to achieve its annual financial guidance for the 19th year in a row.
