Dividend stocks can be fantastic long-term investments. Over the past 50 years, the average dividend stock in the S&P500 has outperformed non-payers by more than 2 to 1. The best returns come from companies that consistently increase their dividends.
There is a long list of great dividend growth stocks. Real estate income (NYSE:O) And Brookfield Renewable (NYSE:BEP)(NYSE: BEPC) currently tops my list as the best to buy right now. They offer high dividend yields and healthy growth prospects. These factors should enable them to achieve attractive total returns in the coming years.
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Realty Income has a phenomenal track record of paying dividends. The real estate investment trust (REIT) recently declared its 653rd consecutive monthly dividend. The REIT has increased its payment for 108 consecutive quarters And 127 times since going public in 1994, growing its payout at a compound annual rate of 4.3%. That rising dividend has contributed to the company’s 14.1% annualized return total return since its stock exchange listing thirty years ago.
The REIT currently offers a dividend yield of over 5.5%. That is several times higher than the S&P 500, which has a dividend yield of less than 1.5%.
Realty Income should be able to continue increasing its dividend going forward. It has a conservative dividend payout ratio for a REIT of 75% of adjusted funds from operations (FFO). Meanwhile, it has one of the strongest balance sheets in the sector. That gives the country enough financial flexibility to continue acquiring income-producing real estate.
Historically, adjusted FFO has grown at approximately 5% per share a combination of rental growth, real estate acquisitions and corporate mergers with other REITs. Realty Income is well-positioned to continue growing at about the same rate going forward, given the sheer size of the commercial real estate market. Add that growth rate to the high dividend yield and Realty Income could deliver a total return of more than 10% per year.
Brookfield Renewable has built a strong track record of paying dividends. The leading global renewable energy The producer has increased its payout at a compound annual rate of 6% over the past twenty years. Currently it yields almost 5%.
That high-yield payout is enabled a very sturdy one foundation. The company’s dividend payout ratio has fallen over the years because it has grown its FFO much faster than its dividend, at a compound annual rate of 12% since 2016. That ratio averaged about 77% through the first nine months of this year. In the meantime, Brookfield has done just that a strong investment grade balance sheet with a lot of liquidity, which further improves the sustainability of the dividend.
