Seeking to build wealth and achieve your investment goals sooner while building a recurring, steadily growing stream of passive income?
Then look no further than these three Dividend Aristocrats yielding 5% or more, which have a long history of regularly hiking their dividends on the back of steadily growing earnings and strong operational performances. By investing in a Dividend Aristocrat, you are gaining exposure to a high-quality company that has a market cap of greater than $300 million and has increased its dividend for at least the last five years straight.
Leading midstream services provider
Predicting the price of crude has become something akin to gazing at tea leaves and trying to divine what will happen in the future. Despite key fundamentals indicating that oil will move higher, it weakened recently, as fears of another supply glut emerged regardless of tougher U.S. sanctions on Iran and Venezuela. While weaker oil is bad news for upstream oil producers it has had little overall impact on those companies such as Pembina Pipeline (TSX:PPL)(NYSE:PBA) that provide critical transportation, storage, and processing infrastructure to the energy patch.
Pembina sports a 5% yield, which, with a payout ratio of less than 50% of operating cash flow, is sustainable and has hiked its dividend for the last seven years straight. The company’s earnings will continue to grow, as the volumes of oil and natural gas transported across is network continues to climb because of rising production in the energy patch and new assets being commissioned. Pembina has $5.5 billion of projects under development, which are expected to enter service between now and mid-2023; these projects will boost earnings and support further dividend hikes.
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Globally diversified renewable energy utility
Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) is one of the few publicly listed clean energy utilities with a globally diversified portfolio across North and South America, India, China, and Western Europe. It has increased its distribution for the last nine years straight to see it yielding a very juicy 6%. There are fears that highly attractive distribution isn’t sustainable, but with a payout ratio of 87% of funds from operations (FFO) combined with growing earnings, it not only appears sustainable, but there are further hikes ahead.
A combination of improved hydrology and new assets being added to Brookfield Renewable’s portfolio saw it report some solid first-quarter numbers, including its share of electricity generated exceeding the long-term average by 7%. The partnership is seeking long-term annual returns of 12-15%. A combination of its proven capital-recycling strategy, knack for making opportunistic, accretive acquisitions, and a portfolio of 134 megawatts of assets under development will allow it to achieve that goal. This will support Brookfield Renewable’s goal of expanding its distribution by 5-9% annually.
North American energy infrastructure giant
Leading provider of energy infrastructure to the North American oil patch Enbridge (TSX:ENB)(NYSE:ENB) has been battered by the market in recent years, despite strengthening its balance sheet and expanding its assets. Over the last year, its shares have remained flat, only gaining 2%, despite oil rallying since the start of 2019.
The energy infrastructure giant, which is responsible for transporting a quarter of all oil and a fifth of the natural gas produced in North America, pays a regular quarterly dividend yielding a juicy 6%. That dividend is sustainable with a payout ratio of around 54% of distributable cash flow per share.
Growing volumes of oil and natural gas transported coupled with Enbridge actively expanding its network through $16 billion of projects under development will boost earnings, supporting the sustainability of that dividend and further increases. Enbridge plans to grow its distributable cash flow per share by 5-7%, thereby allowing it to continue hiking its dividend on an annual basis.
When that is coupled with its wide economic moat and growing demand for the utilization of Enbridge’s infrastructure, earnings will continue to grow at a solid clip.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Matt Smith has no position in any of the stocks mentioned. Pembina is a recommendation of Dividend Investor Canada. Brookfield Renewable Partners is a recommendation of Dividend Investor Canada. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.