I'd Double My Position in These 3 Dividend Stocks Without Thinking Twice
Key Points
Brookfield Renewable expects to grow its dividend by 5% to 9% per year.
Brookfield Infrastructure has increased its payout for 17 straight years.
Energy Transfer aims to increase its high-yielding distribution by 3% to 5% annually.
- 10 stocks we like better than Energy Transfer ›
Dividend stocks make up a large portion of my portfolio. While my desire to earn passive income is a big driver of my dividend investment strategy, dividend stocks have historically delivered higher returns than non-payers while exhibiting less volatility. That's why I routinely add to my dividend stock positions.
I already hold meaningful allocations to Brookfield Renewable (NYSE: BEPC)(NYSE: BEP), Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP), and Energy Transfer (NYSE: ET). I wouldn't think twice about doubling my position in these top dividend stocks. Here's why I have such high conviction in this trio.
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Powerful total return potential
Brookfield Renewable is one of the largest publicly traded renewable energy producers in the world. Its operations span hydro, wind, solar, and energy storage assets across North and South America, Europe, and Asia. The company sells the electricity it produces under long-term, fixed-rate power purchase agreements (PPAs) with utilities and large corporations.
Most of Brookfield's PPAs contain inflation-linked rate escalation clauses, which should grow its funds from operations (FFO) per share by 2% to 3% annually. Meanwhile, margin-enhancement activities, such as signing higher-rate PPAs as legacy contracts expire, should add another 2% to 4% to its FFO per share each year. Additionally, Brookfield expects that development projects will add another 4% to 6% to its FFO per share each year, while acquisitions should further boost its growth rate.
Brookfield's multiple catalysts should drive more than 10% annual FFO per share growth through at least 2031. That should power 5% to 9% annual dividend growth. Brookfield has increased its payout, which currently yields more than 4%, by at least 5% each year since 2011.
A similarly strong sibling
Brookfield Infrastructure is the infrastructure-focused sibling of Brookfield Renewable, both of which are operating businesses of global investment firm Brookfield Corporation. This entity owns and operates a diverse portfolio of mission-critical infrastructure businesses. Its global operations span the utility, transport, midstream, and data sectors. The bulk of its assets operate under long-term contracts or government-regulated rate structures that generate predictable, inflation-linked cash flows.
The global infrastructure operator invests in assets capitalizing on global megatrends, including digital infrastructure driven by AI. It's investing in data centers, semiconductor fabrication facilities, behind-the-meter power solutions, and other related infrastructure. To help fund its growth, Brookfield Infrastructure routinely sells mature assets to recycle capital into higher-return new investments. It has sold around $1 billion in assets so far this year, supporting $400 million in new investment opportunities, including the launch of a new equipment leasing platform for data centers.
Brookfield Infrastructure's multifaceted growth strategy should support FFO per share growth of more than 10% annually. That should enable the company to increase its 4.9%-yielding dividend by 5% to 9% each year. Brookfield has increased its dividend for 17 straight years, growing it at a 9% compound annual rate.
Gas-powered distribution growth
Energy Transfer is one of the largest energy midstream companies in North America. The master limited partnership (MLP), which sends investors a Schedule K-1 Federal tax form each year, operates pipelines, processing plants, storage terminals, and export facilities. The company's midstream assets generate steady cash flow, with 90% coming from stable fees.
The MLP is investing heavily to expand its operations. It plans to spend $5.5 billion to $5.9 billion on growth capital projects this year. The company is building several major capital projects, including two large-scale gas pipelines ($2.7 billion Hugh Brinson and $5.6 billion Desert Southwest expansion project). It has projects underway that should enter commercial service through 2030.
Energy Transfer's expansion projects should support continued distribution increases. The MLP expects to grow its nearly 7%-yielding payout by 3% to 5% each year.
High conviction dividend stocks
Brookfield Renewable, Brookfield Infrastructure, and Energy Transfer are three of my highest conviction dividend stocks. They generate stable, growing cash flows, which support their steadily rising, high-yielding dividends. Their combination of income, growth, and financial strength is why I wouldn't think twice about doubling my already sizable positions in these top-notch dividend stocks.
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Matt DiLallo has positions in Brookfield Corporation, Brookfield Infrastructure, Brookfield Infrastructure Partners, Brookfield Renewable, Brookfield Renewable Partners, and Energy Transfer and has the following options: short July 2026 $40 puts on Brookfield Corporation. The Motley Fool has positions in and recommends Brookfield Corporation. The Motley Fool recommends Brookfield Infrastructure Partners, Brookfield Renewable, and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
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