Investors love passive income. We can use it to pay our bills, finance our vacations or donate to charities. And if we can make enough money from our investments to cover all our expenses – without sacrificing too much of our limited time and energy to earn it – then we are truly free.
Here are two passive income-producing dividend stocks that can help you further your own journey to financial independence.
Dividend Stocks to Buy #1: Kinder Morgan
About 40% of the natural gas produced in the US continues Kinder Morgan‘S (NYSE: KMI) extensive pipeline network. With artificial intelligence (AI) set to create massive demand for more electricity, the energy titan’s critical infrastructure is about to become even more valuable.
Kinder Morgan’s nearly 80,000 miles of pipeline and 139 storage terminals also help move crude oil, gasoline, renewable fuels, chemicals and a host of other products across the US. These crucial energy services generate predictable profits. Only 5% of Kinder Morgan’s cash flow is directly affected by commodity price fluctuations. The remaining 95% is hedged or secured by fixed price contracts.
These reliable, tollgate-like revenue streams have allowed the infrastructure giant to grow its adjusted profits 8% annually since 2016. These steadily rising profits have allowed Kinder Morgan to strengthen its balance sheet by shedding more than a quarter of its debt over this period. , while still rewarding its investors with more than $20 billion in dividends and share buybacks.
In fact, with U.S. demand for natural gas expected to rise nearly 20% by the end of this decade, Kinder Morgan is gearing up for further expansion. As of June 30, the company had committed $5.2 billion to promising growth projects. The booming liquefied natural gas (LNG) export market is a particularly attractive opportunity that is expected to drive the use of Kinder Morgan’s pipelines and other infrastructure assets.
Moreover, these growth estimates for natural gas consumption may prove conservative. Many investors are not yet fully aware of the impact AI could have on energy demand. Huge AI data centers gobble up electricity, much of which will have to be generated by gas-fired power plants. During the company’s second-quarter earnings call in July, executive chairman Richard Kinder said he saw early signs of an impending surge in AI-powered natural gas demand that could be “mind-boggling.”
Today, Kinder Morgan’s passive income-producing stocks yield a solid 4.6%. With the AI boom set to accelerate growth, the energy leader’s investors can expect even bigger cash payments in the coming years.
Dividend Stocks to Buy No. 2: Brookfield Renewable
Like natural gas, renewables will be needed to quench the world’s voracious appetite for energy. Brookfield Renewable (NYSE: BEPC) (NYSE: BEP) offers investors a proven way to make money growing clean energy projects around the world.
Brookfield has built an impressive portfolio of solar, wind, hydro, nuclear and other energy generating assets in North and South America, Europe and Asia. The company has a knack for finding undervalued opportunities and successfully developing projects. Brookfield’s massive size, strong balance sheet and diverse capital sources allow it to acquire assets on attractive terms, while its operating expertise allows it to improve its economics over time.
Brookfield is also very adept at generating profits when it chooses to sell fully developed assets. It then ‘recycles’ this money into new projects with a higher return. This virtuous cycle has produced stronger returns for investors than if Brookfield simply retained all the projects it builds and acquires.
Looking ahead, the clean energy giant’s investment opportunities are virtually endless. From concerns about climate change to calls for greater energy security to technological advances that are driving down the cost of renewable energy, there are many factors driving demand for clean energy projects. And like Kinder Morgan, Brookfield will benefit from the AI-powered increase in electricity demand. In total, management has identified approximately $100 billion in potentially lucrative acquisition candidates.
Brookfield Renewable has increased its cash payout to investors 6% per year for nearly a quarter century. With the well-stocked investment pipeline set to continue to drive profits, this impressive run is likely to continue well into the future.
Don’t miss this second chance at a potentially lucrative opportunity
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Amazon: If you had invested $1,000 when we doubled in 2010, then you have $21,285!*
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We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns October 21, 2024
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Brookfield Renewable and Kinder Morgan. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
2 Supercharged Dividend Stocks to Buy Now was originally published by The Motley Fool
