I’m a big fan of dividend stocks. I like to collect the passive income they send me. Furthermore, dividend stocks have historically outperformed non-paying stocks by a wide margin (9.2% average annual total return versus 4.3% since 1973, according to Ned Davis Research and Hartford Funds).
Dividend growers have achieved the best return (10.2%). That’s why I focus on companies with an excellent history of dividend growth seems will very likely continue. Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP), NextEra Energy (NYSE: NO)And Prologis (NYSE: PLD) currently at the top of my buying list. Here’s why they’re great dividend stocks to buy in October.
An extremely attractive one value proposition
Brookfield Infrastructure has been a great dividend stock over the years. The global infrastructure manager has increased its payout at a compound annual rate of 9% over its 15-year history. It currently offers an almost 4% return dividend covered by a conservative 67% dividend payout ratio.
The company expects further dividend growth. The aim is to increase this by 5% to 9% annually. This view is supported by the robust growth profile. Brookfield Infrastructure expects to grow its financial resources from operations (FFO) per share by more than 10% per year, driven by organic growth and positive acquisitions.
Investors get this strong growth profile at an attractive value in October. Brookfield Infrastructure currently trades at approximately 14.1 times FFO. That’s well below the historical average of 15.5 times and the 16.5 times multiple it has traded at over the past five years. With high returns, strong growth prospects and a cheap price, Brookfield Infrastructure could deliver robust total returns in the coming years.
Strong dividend growth should do that continue
NextEra Energy is an elite dividend growth stock. It has increased its payout for 30 years in a row. The utility has increased its dividend by about 10% annual rate over the past 20 years. It expects to increase its payout (which currently yields almost 2.5%) by about 10% per year until at least 2026.
There are two factors driving NextEra’s dividend growth plan. It has a low dividend payout ratio (59% compared to a peer group average of 65%). Additionally, the company expects adjusted earnings per share (EPS) growth through 2027 to be at or near the high end of the 6% to 8% annual range.
Several catalysts contribute to the healthy earnings growth prospects. It benefits from operating the largest electric utility in Florida, which has abundant sunshine (Great for solar energy) and a growing population. Additionally, the company is investing heavily to expand its renewable energy business outside the state, where it benefits from robust demand. As a leader in renewable energy, NextEra Energy should continue to grow at a healthy pace for years to come to come.
Lots of built-in growth
Prologis has achieved above-average dividend growth over the years. The leading one industrial real estate investment trust (REIT) has increased its dividend at a compound annual rate of 13% over the past five years. That’s more than double the average S&P500 (5%) and other REITs (5%).
The REIT should be able to continue to grow more than 200% 3% dividend at an above-average rate. It responds to the robust demand for warehouse space, that is keeping occupancy rates high and driving up rental prices. The company expects rental growth alone (annual rent escalations and higher market rates as existing leases expire) to deliver high single-digit annual same-store sales growth through 2026. Add in development projects (including data center investments) and the REIT should grow its core FFO per share by 9% to 11% annually. Meanwhile, there is additional upside potential from completing acquisitions, which have added an average of 1.5% to FFO per share growth in recent years.
Income and more
Brookfield Infrastructure, NextEra Energy and Prologis all offer attractive dividends. Furthermore, they all have strong growth prospects, which should allow them to continue increasing their payouts at a healthy pace. That puts them in a great position to generate above-average total returns, making them excellent dividend stocks buy this month.
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Matt DiLallo holds positions at Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, NextEra Energy and Prologis. The Motley Fool holds positions in and recommends NextEra Energy and 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.
Here Are My Top-3 Dividend Stocks to Buy in October was originally published by The Motley Fool
