Brookfield Infrastructure's contractually secured cash flows put its dividend on rock-solid ground.
NextEra Energy's rate-regulated revenues help support its steadily rising dividend.
Vici Properties' long-term leases make its high-yielding dividend a low-risk gamble.
Investing involves risk. However, some investments are much lower risk than others. Companies that generate contractually guaranteed revenues, have fortress financial profiles, and boast clearly visible growth profiles are at the lower end of the risk spectrum.
Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP), NextEra Energy (NYSE: NEE), and Vici Properties (NYSE: VICI) have all those traits. That enables them to pay growing dividends. Their combination of income, financial strength, and growth makes them as close to a sure thing as you'll find in a stock investment.
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Brookfield Infrastructure operates a globally diversified portfolio of utility, midstream, transport, and data infrastructure assets. Most of its businesses operate under highly contracted or regulated frameworks (85% of its funds from operations or FFO) with a very long duration (nine years on average). As a result, it produces very stable cash flow (only 5% is market sensitive), which benefits from inflation (70% indexed to inflation).
The company has a strong financial profile. Brookfield pays out 60% to 70% of its stable cash flow in dividends (a current yield of 4.3%). It also has a healthy balance sheet (BBB+ credit rating). The company's financial flexibility enables it to invest in organic expansion projects and make acquisitions to grow its operations and earnings.
Brookfield currently has over $9 billion of organic expansion projects it expects to complete over the next three years, including multiple data centers worldwide and two U.S. semiconductor foundries. Additionally, Brookfield routinely recycles capital by selling mature businesses and reinvesting the proceeds into higher-returning new investments (it secured $1.5 billion of new investments last year). The company's multiple growth drivers should support FFO per share growth of more than 10% annually and dividend growth of 5% to 9% per year. Brookfield has increased its dividend for 16 straight years.
NextEra Energy operates the country's largest electric utility (FPL) and a leading clean energy infrastructure development platform (NextEra Energy Resources). FPL generates stable government-regulated revenues while the energy resources segment produces steady cash flow by selling power to other utilities and large corporations under long-term, fixed-rate power purchase agreements.
The energy company has a conservative dividend payout ratio and a top-tier balance sheet (Baa/A- credit ratings). That gives it the financial flexibility to invest in growing its operations.
NextEra Energy sees the potential to invest up to $325 billion in capex through 2032, including building new renewable energy capacity, investing in data center hubs, and constructing electricity transmission lines. This investment level should support more than 8% annual adjusted earnings-per-share growth over that time frame. That should enable NextEra to continue increasing its 2.7%-yielding dividend (6% annual growth targets for 2027 and 2028), which it has done for more than 30 years.
Vici Properties is a real estate investment trust (REIT). It invests in experiential real estate, including gaming, hospitality, wellness, entertainment, and leisure destinations. It leases its owned properties back to high-quality operating companies under very long-term triple-net leases (a nearly 40-year weighted-average remaining lease term). Vici Properties also invests in real estate-backed loans. These investments generate very stable income.
The REIT pays out about 75% of its adjusted FFO in dividends (a current yield of 6.3%), retaining the rest to reinvest in new experiential real estate. It also has a solid investment-grade balance sheet, with its leverage ratio currently at the low end of its target range.
Vici Properties' leases increasingly escalate rents at rates tied to inflation (42% of its leases in 2026, rising to 90% by 2035). As a result, its existing portfolio should generate stable and steadily rising rental income. Meanwhile, Vici Properties routinely invests in new properties, often through existing partnerships. It has the option to acquire several properties from existing partners. These growth drivers should enable Vici to continue increasing its dividend. The REIT has grown its payout at a 6.6% compound annual rate since the end of 2018, triple the pace of other REITs focused on investing in triple-net lease real estate.
While there's no sure thing in investing, Brookfield Infrastructure, NextEra Energy, and Vici Properties look like safe bets. They should continue growing their earnings and dividends at healthy rates, positioning them to deliver strong total returns over the long run. They're ideal stocks for those seeking investments with a high likelihood of paying off.
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Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, NextEra Energy, and Vici Properties. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Brookfield Infrastructure Partners and Vici Properties. The Motley Fool has a disclosure policy.