Forever Dividend Stocks: 3 Income Stocks I Never Plan to Sell

Key Points

• Brookfield Renewable has grown its dividend at a 6% compound annual rate since 2001.

• Invitation Homes has increased its dividend every year since going public in 2017.

• Realty Income has raised its dividend payment for 111 quarters in a row.

• 10 stocks we like better than Realty Income ›

Investing legend Warren Buffett's favorite holding period is forever. I try to invest with the same mindset, especially when it comes to dividend stocks. I like to buy and hold companies that I believe can provide me with a lifetime of passive dividend income.

Here are three top dividend stocks I plan to never sell.

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1. Brookfield Renewable

Brookfield Renewable (NYSE: BEPC)(NYSE: BEP) is a leading global renewable power and decarbonization solutions provider. The company's hydroelectric, wind, and solar energy assets generate stable and growing cash flow.

Brookfield currently sells about 90% of the power it produces under long-term (14-year average remaining term) power purchase agreements (PPAs) with utilities and large corporate buyers. Most of those PPAs index power rates to inflation (70% of its revenue). As a result, Brookfield generates very predictable and steadily rising cash flow to support its high-yielding dividend (4.4% current yield).

The company expects that inflation-driven rate increases will grow its funds from operations (FFO) per share at a rate of around 2%-3% annually. Meanwhile, power prices, especially from renewable sources, are growing faster than inflation, driving Brookfield's view that it can lock in even higher rates as legacy PPAs expire and it signs new contracts at the higher market rates. These margin enhancement activities should add another 2% to 4% to its FFO per share each year.

Brookfield is also capitalizing on the massive and growing need for clean power by developing additional renewable energy capacity. The company has an extensive backlog of projects, driving its view that it can add another 4% to 6% to its FFO per share each year by developing new renewable power projects.

Additionally, Brookfield routinely acquires renewable energy platforms, further enhancing its growth. The company expects to grow its FFO per share at a rate of more than 10% annually in the future, supporting its plans to increase its dividend by 5% to 9% each year. Brookfield has grown its payout at a 6% compound annual rate since 2001.

2. Invitation Homes

Invitation Homes (NYSE: INVH) is a real estate investment trust (REIT) focused on owning and managing single-family rental properties. The company owns or manages over 110,000 homes across 16 top housing markets. It focuses on metro areas that benefit from strong employment and population growth rates, key drivers of housing demand.

Strong demand keeps occupancy rates high across its portfolio while driving healthy rent growth. Invitation Homes' same-store net operating income has grown at a 6.1% annual rate since its initial public offering in 2017. That provides it with a steadily rising income stream to support its dividend (3.8% current yield).

Invitation Homes routinely buys additional rental properties to drive even faster FFO per share growth. It will purchase properties on the open market, acquire portfolios from other investors, and buy homes directly from builders. The REIT currently has over 1,800 homes under contract from leading homebuilders. Invitation Homes' growth drivers -- portfolio expansion, rent growth, and its expanding third-party management platform -- should enable the REIT to continue increasing its dividend, which it has done every year since it went public.

3. Realty Income

Realty Income (NYSE: O) is also a REIT, though it has an entirely different focus. It invests in a diverse portfolio of commercial real estate (retail, industrial, gaming, and other properties) secured by long-term net leases with many of the world's leading companies. Net leases produce very stable rental income because tenants cover all property operating costs. This provides it with extremely steady cash flow to cover its monthly dividend (5.6% current yield).

The REIT aims to pay out about 75% of its adjusted FFO as dividends, retaining the rest to fund new income-generating investments. Realty Income also has one of the strongest balance sheets in the REIT sector, enabling it to steadily grow its portfolio.

Realty Income's ever-expanding portfolio has enabled the REIT to routinely increase its dividend. The company has raised its dividend payment 131 times since its public market listing in 1994, including for the past 111 quarters in a row.

Forever income stocks

Brookfield Renewable, Invitation Homes, and Realty Income align perfectly with my dividend strategy. Their strong financial profiles and consistent dividend growth should provide me with enduring, rising income. This combination of reliability and growth is why I never plan to sell these dividend stocks.

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Matt DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners, Invitation Homes, and Realty Income. The Motley Fool has positions in and recommends Invitation Homes and Realty Income. The Motley Fool recommends Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.