Dividend stocks can be phenomenal long-term investments. They produce dividend income and deliver a rising stock price as they grow their profits. Those two factors can combine to produce strong total returns, which can really add up over the years. For example, a stock delivering a 10% annual total return can double your money every seven years.
Brookfield Renewable (BEPC -0.70%) (BEP -0.26%) and Enbridge (ENB 0.05%) are great stocks for those seeking a high dividend yield. They also have excellent growth prospects. Those features make them great income stocks to buy and hold for the next 10 years.
Increasingly visible growth through 2034
Brookfield Renewable has increased its dividend at a 6% compound annual rate over the past two decades. The leading global renewable energy producer offers a dividend yield of more than 4.5%. That's much higher than the S&P 500's (^GSPC -1.11%) dividend, which is currently near a 20-year low of 1.2%
The company expects to increase its payout by 5% to 9% annually in the long term. It should have ample power to achieve that plan. Brookfield Renewable anticipates growing its funds from operations (FFO) per share at a more than 10% annual rate over the next decade. That growth is highly visible and secured through 2029, and increasingly visible and secured beyond that.
Development projects will supply about half that growth. Brookfield currently has a staggering 200 gigawatts (GW) of projects in various stages of its development pipeline, multiples above its current operating capacity (37 GW). It expects to commission around 10 GW of capacity annually in the coming years.
Brookfield also expects to benefit from rising power prices via inflation-linked rate increases on its existing contracts and locking in higher market prices as legacy agreements expire. On top of that, the company plans to continue completing accretive acquisitions. It's currently evaluating over $100 billion of new investment opportunities that could help power growth in the coming years.
Visible growth through at least 2029
Enbridge currently offers a dividend yield above 6%. The Canadian pipeline and utility company has increased its payout for 29 straight years, growing it at a 10% compound annual rate. While dividend growth has moderated in more recent years (it raised its payment by 3.1% last year), it should continue to trend higher in the future.
The energy infrastructure company currently has a staggering 27 billion Canadian dollars ($19.4 billion) of secured capital projects in its backlog. They include oil terminal capacity additions, natural gas pipeline projects, gas utility expansions, and renewable energy projects. Enbridge's slate of projects has in-service dates through 2029. That capital project backlog gives Enbridge a lot of visibility into its future earnings growth.
The company has meaningful additional funding capacity after paying its dividend and funding its secured projects. That will give it the flexibility to sanction additional projects and make bolt-on acquisitions as opportunities arise. The company has many potential capital projects under development to further enhance and extend its growth profile.
Enbridge expects to grow its earnings before interest, taxes, depreciation, and amortization (EBITDA) by around 7% to 9% annually through 2026, fueled by expansion projects and a trio of gas utility acquisitions it closed this year. Meanwhile, its cash flow per share should rise by around 3% annually during that time frame, slowed down due to some modest headwinds from tax legislation. Cash flow per share growth should accelerate after 2026, likely growing by around a 5% annual rate, matching its expected medium-term EBITDA growth rate. That should support dividend growth at around that same yearly pace.
High yields and total return potential
Brookfield Renewable and Enbridge pay high-yielding dividends, which they expect to continue growing. They also have solid growth prospects. Add their yields to their growth rates, and they could generate double-digit total returns in the coming years. That makes them great dividend stocks to buy and hold over the next decade.
