Do you have $ 1,000? Here are 3 great dividend-paying stocks to buy right now
Dividend stocks are a great way to start building wealth. Not only do dividend payers provide passive income, they have also historically outperformed the S&P 500. That is why investors should consider adding dividend paying stocks to their portfolio.
It doesn’t take a lot of money to start investing in dividend-paying stocks. Investors with $ 1,000 (or less) can build a good portfolio of income by adding Enterprise Product Partners (NYSE: EPD), Clearway Energy (NYSE: CWEN)(NYSE: CWEN.A), and Brookfield Renewable Power (NYSE: BEP)(NYSE: BEPC). Here’s why our contributors think these dividend-paying stocks stand out as great income-generating options.
Unloved energy giant
Brewer Ruben Gregg (Enterprise Product Partners): Goliath North American Intermediate Enterprise Products Partners offers investors a large distribution yield of 7.3%. The Master LP’s pipeline, storage, transportation and processing asset portfolio rivals just about any other big name in the industry. And, proof of Enterprise’s long-term success, it has been increasing its distribution for more than two decades.
This return, however, is what is most interesting as it sits near the high end of the partnership’s historical return range. It’s not the highest level, but it’s high enough to suggest that Enterprise is trading today at a relatively cheap valuation. There is a good reason for this, given the low level of investment in the energy sector in light of the global clean energy push. But don’t let that scare you: Oil and natural gas are expected to remain major contributors to the energy pie for years to come. Enterprise intends to be there to help move these fuels and the products they are made into.
Two key points that should reassure dividend-focused investors are that Enterprise’s business is largely fee-based (nearly 90% of gross operating margin in 2020) and unrelated to commodities, and she covered her distribution a whopping 1.8 times in the first quarter. In other words, it is a very stable company with a lot of leeway to face adversity while continuing to reward investors with big payouts. And, given that today’s pricing suggests that it is no longer in vogue, now is the time to act on this industry-leading middleman name. It is likely that investors will end up rewarding it with a higher valuation.
A powerful income stream
Matt DiLallo (Clearway Energy): Clearway Energy is a great option for first-time investors looking to earn passive income. the renewable energy The generator generates stable cash flow by selling its electricity under long-term fixed rate contracts to utilities and other end users. He uses most of that money to pay an attractive dividend. About 5% dividend yield, that’s well above the market average of around 1.3%.
However, what sets Clearway Energy apart is that it offers more than a bind-as a stream of income. Due to its focus on the fast growing renewable energy sector, it has a lot of benefits ahead as it expands its portfolio of clean power generating cash flow assets.
Overall, Clearway believes it can increase its dividend at an annual rate of 5-8% over the next several years. This plan is fueled by the company’s ability to acquire additional clean energy assets that generate cash flow. It has a solid financial profile thanks to the cash it retains after the payment of the dividend and the improvement of its balance sheet, which gives it the flexibility to continue to make new investments. Meanwhile, its parent company (Clearway Energy Group) is a leading renewable energy project developer with a large portfolio of projects under construction and development. For this reason, Clearway has access to a constant stream of investment opportunities.
Combined with its current high yield, Clearway’s growing portfolio, cash flow and dividends should enable the clean energy company to generate strong total annual returns for years to come. This sets him apart as one of the best dividend stocks on renewable energies about.
This dividend growth action is too intriguing to ignore
Neha Chamaria (Brookfield Renewable): With Brookfield Renewable shares losing nearly 21% of their value in the past six months, there is a great opportunity for long-term income investors to invest money in a stock that pays large dividends year after year. . The action is even more compelling when you consider that Brookfield is a solid player in the hot renewable energy industry.
Brookfield Renewable’s size and dividend growth is dependent on the amount of funds from operations (FFOs) the company can generate. Between 2010 and 2020, he increased his FFO per share at a compound annual rate of 10% and increased his dividend every year since, as he aggressively expanded his portfolio to hydropower over the years, and more recently to solar and wind power. As it primarily sells electricity under long-term fixed rate agreements, Brookfield has been able to generate stable cash flow and distribute regular dividends.
The best part is that Brookfield is already one of the world’s leading publicly traded renewable energy companies today, and nothing can stop it. Picture this: At the end of the first quarter, Brookfield’s development pipeline had reached 27 gigawatts (GW) of its existing installed capacity of 21 GW. The company relies on multiple levers to boost the FFO until 2025, including:
- Escalators linked to inflation.
- Improved margin.
- Development of projects in the pipeline.
- Mergers and Acquisitions.
So while the first three factors could increase Brookfield’s FFO from 6% to 11% through 2025, they could potentially add an additional 9% growth through mergers and acquisitions. Its dividends are expected to grow alongside these gains. In fact, management is aiming for 5 to 9% growth in the annual dividend over the long term. With renewable energy poised to change the energy landscape and Brookfield already a leader in the game with a decent 3% dividend yield, there is little reason to doubt the potential of this cheap dividend growth stock. .
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.