The stock market is trading near all-time highs and might gain further pace with multiple interest rate cuts on the horizon. This provides investors an opportunity to identify quality dividend stocks and benefit from a recurring stream of income as well as capital gains over time.
Image source: Getty Images
A once-in-a-decade opportunity to buy income stocks
With inflation slowing down and interest rates moving lower, the time is ripe to buy and hold fundamentally strong dividend stocks trading at a cheap valuation. A tasty dividend yield coupled with share price appreciation should help long-term investors benefit from market-beating returns in the upcoming decade. Here are two such dividend stocks you can consider buying right now.
Brookfield Renewable Partners stock
Valued at $25 billion by market cap, Brookfield Renewable Partners (TSX:BEP.UN) owns a portfolio of renewable power-generating facilities in the Americas, Europe, and Asia. It generates electricity through hydroelectric, wind, solar, distributed generation, pumped storage, and biomass sources.
Brookfield Renewable continues to deploy capital into growth opportunities that allow it to gain traction and benefit from economies of scale. In the second quarter (Q2) of 2024, the company commissioned around 1.4 gigawatts of new capacity. If we include its development activities and acquisitions, Brookfield Renewable invested nearly US$1 billion in the June quarter.
Notably, Brookfield Renewable is poised to benefit from the artificial intelligence (AI) megatrend. For instance, data centre investment continues to accelerate globally due to massive investments in generative AI platforms.
In fact, data centres could account for a fifth of the total electricity consumption in the U.S. by the end of the decade, acting as a secular tailwind for Brookfield Renewable and other clean energy peers. Brookfield also estimates the global installed capacity for electricity generation to double globally in the next 20 years.
Brookfield Renewable pays shareholders an annual dividend of US$1.42 per share, translating to a forward yield of almost 5%. Moreover, these payouts have almost doubled in the last 13 years.
Dream Industrial REIT stock
Valued at $4.2 billion by market cap, Dream Industrial (TSX:DIR.UN) pays shareholders an annual dividend of $0.70 per share, indicating a yield of 4.7%. Dream Industrial owns and operates a portfolio of cash-generating industrial properties in key North American markets while seeking a strong foothold in Europe.
In Q2 of 2024, Dream Industrial grew its net operating income by 5% year over year, while its FFO (funds from operation) per unit stood at $0.25, indicating a payout ratio of around 70%. It leased more than 500,000 square feet of projects at strong rents in regions such as Ontario and Alberta. The real estate investment trust continues to execute its capital-recycling initiatives to upgrade its portfolio quality and completed $50 million of disposition in the June quarter.
Dream Industrial chief executive officer, Alexander Sannikov stated, “With nearly $600 million of available liquidity and our marginal cost of debt declining by over 50 basis points since the last quarter, about our balance sheet remains strong.”
Given consensus price target estimates, Dream Industrial REIT trades at a 10% discount to those estimates. If we adjust for dividends, cumulative returns will be closer to 15% in the next 12 months.
