Regular and growing dividends often indicate the financial strength and underlying growth of a company's business. They also indicate its management's expectations of continued future growth. Investing in such dividend-paying companies can not only generate a regular dividend income but also provide attractive capital appreciation potential. Here are three such rock-solid dividend stocks to consider buying right now.
NextEra Energy Partners
In five years, NextEra Energy Partners (NYSE:NEP) has doubled its per-unit distribution. Its distribution has grown to $0.66 per unit in the second quarter of this year, from $0.33 per unit in Q2 2016. NextEra Energy Partners owns one of the largest portfolios of renewable assets, diversified by both type and geography. The company's portfolio has a remaining contract life of around 14 years with diversified counterparties. Long-term contracted cash flows help provide NextEra Energy Partners access to low-cost equity and debt financing.
The company expects to grow organically as well as by acquisitions. Acquisitions from parent NextEra Energy (NYSE:NEE) play a vital role in NextEra Energy Partners' consistent growth. The above factors make NextEra Energy Partners confident of delivering a 12% to 15% average annual growth in its per unit distributions through 2024. At that rate, the company's distributions could double again in five years. So, if you're looking to double your dividend income, NextEra Energy Partners stock makes an appealing buy.
Canadian company Enbridge (NYSE:ENB) has increased its dividend for 26 consecutive years. Enbridge doubled its 2014 per share dividend of 1.40 Canadian dollars in five years by 2019. However, much of that increase came from the company's 2015 boost of 33% to CA$1.86 per share. Enbridge hasn't yet doubled that dividend. It should be more than double in 2022 -- which increases the time to double to seven years.
An exceptionally high dividend hike in 2015 and a lower dividend growth rate in the last two years have resulted in the increase in the time to double Enbridge's dividend. Notably, lowering dividend growth in response to oil price and demand volatility is a prudent step to maintain balance sheet strength.
For 2021, Enbridge increased its per share dividend by 3%. While that is lower than the company's compound annual growth rate of 10% between 1995 to 2021, it was due to the challenging environment in the last couple of years. Enbridge's 3% dividend growth looks commendable considering that most energy companies either cut their dividend or held it constant in 2020.
Through 2023, Enbridge expects per share distributable cash flow growth of 5% to 7%. The company's dividend should grow in line with the DCF growth. Assuming an average growth rate of 6%, it would take around 12 years to double Enbridge's dividend. At a yield of 6.6%, you surely won't mind waiting that long to see your dividend double. Enbridge's diversified assets and resilient cash flows mean that it could continue with its 26-year-long dividend growth streak in the coming years.
Algonquin Power & Utilities
Algonquin Power & Utilities (NYSE:AQN) expects to pay a total dividend of $0.67 per share for 2021. Based on that, the company's per share dividend would get doubled in seven years. The company derives roughly one-third of its profit from renewable generation and two-thirds from electric, gas, and water utilities.
Algonquin Power & Utilities plans to spend $9.4 billion on capital projects through 2025. Of this, $3.1 billion investments are planned in the renewable energy segment. Moreover, the company has already spent $3.1 billion on capital projects in 2021. In the second quarter, Algonquin increased revenue by 54% while the company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 39% year-over-year.
Algonquin Power & Utilities has a steady and growing cash flow stream. The company's renewable operations give it a head start in a segment with a long runway for growth. In 10 years, Algonquin has increased its dividend at a compound annual growth rate of 10%. The company's steady earnings growth and its planned capital projects place it well for sustained dividend growth. If Algonquin Power & Utilities continues growing its dividend at this historic rate, they could double again in seven years.