There are three types of dividend stocks: those that don't change their dividend payments, those that have cut or eliminated their payouts, and those that initiate and grow their dividends. That last of those groups has significantly outperformed other dividend stocks over the long term:
|
Dividend Policy |
Returns |
|---|---|
|
Dividend growers and initiators |
10.2% |
|
No change in dividend policy |
6.8% |
|
Dividend cutters and eliminators |
(0.9%) |
Data source: Ned Davis Research and Hartford Funds.
Given the returns data on dividend stocks by their policy, investing in dividend growth stocks is a no-brainer strategy. Brookfield Renewable (BEPC 9.02%) (BEP 8.33%) and Enbridge (ENB 1.64%) are standout dividend growth stocks to buy this April. They have excellent records of growing their higher-yielding dividends, a policy that should continue in the future.
Powerful total return potential
NYSE: BEPC
Key Data Points
Brookfield Renewable has delivered very consistent dividend growth since its public market listing in 2011. The leading global renewable energy producer has increased its payment by at least 5% annually during that 14-year period. That growing dividend has helped power strong total returns for the company's investors of 11.2% annualized.
The company is in an excellent position to continue growing its high-yielding dividend, which currently sits at 5.3%. It sells most of the power it produces under long-term contracts that index rates to inflation. These contracts should boost its funds from operations (FFO) per share by 2% to 3% per year. Meanwhile, with market power prices growing faster than inflation, the company expects that as legacy contracts expire, it will sign new ones at higher rates. Margin enhancement activities like that should add another 2% to 4% to its FFO per share each year. Brookfield also has a vast pipeline of renewable-energy development projects, which should further boost its FFO per share by 4% to 6% per year.
Add it up, and its organic growth drivers should help power 8% to 13% FFO per share growth each year. On top of that, Brookfield has an excellent record of making accretive acquisitions to further accelerate its growth rate. These growth drivers position Brookfield to grow its dividend by 5% to 9% annually over the long term. Add its yield to its growth rate, and Brookfield could continue to produce double-digit total annualized returns in the coming years.
Ample fuel to continue growing shareholder value
NYSE: ENB
Key Data Points
Enbridge has a fantastic record of paying dividends. The Canadian pipeline and utility company has paid dividends for more than 70 years while growing its payout for the past 30 in a row. It has increased its payout at an impressive 9% compound annual rate over those three decades. Enbridge's growing payout has helped fuel strong total returns over the past 20 years of more than 11% annualized.
The energy infrastructure giant has plenty of fuel to continue growing its high-yielding payout, which currently sits at 6%. Enbridge's pipeline and utility assets generate very stable cash flow backed by long-term contracts and government-regulated rate structures. It pays out about 60% to 70% of that stable cash flow in dividends, retaining the rest to help fund expansion projects. Enbridge also has a strong investment-grade balance sheet. These two factors give it billions of dollars of annual investment capacity.
Enbridge currently has a massive multibillion-dollar backlog of commercially secured capital projects under construction. It's expanding its leading oil pipeline network, building more natural gas transportation infrastructure, investing in growing its natural gas utilities, and building renewable energy projects. The company currently has projects on track to enter commercial service through the end of the decade. Those projects should grow its cash flow per share by 3% annually through next year and at a 5% annual pace after 2026. That should support similar annual dividend growth. When combining Enbridge's yield with its growth rate, it could have the fuel to produce a total annual return of around 10%.
Top-notch dividend stocks
Brookfield Infrastructure and Enbridge have exceptional records of growing their dividends. That has helped give them the fuel to produce strong total returns. With more dividend growth likely ahead, they should continue generating attractive total returns for their investors. That makes them no-brainer buys for dividend investors this coming month.
