After years of lower yields, income-focused investors have many more attractive options these days. While the overall dividend yield of the market remains well below its historical average (currently around 1.5% for the S&P 500), many companies offer much more attractive yields.
American Tower (AMT -0.52%), Brookfield Renewable (BEPC 0.54%) (BEP 1.04%), and Kenvue (KVUE -2.39%) currently offer dividend yields more than double the market’s average. Furthermore, these companies should be able to increase their already attractive payouts for years to come. That makes them excellent options for those seeking durable and steadily rising passive income streams.
A towering payout
American Tower currently offers a 3.5% dividend yield. The data infrastructure REIT backs that well-above-average payout with stable cash flow and a strong balance sheet. The company signs long-term leases with tenants for capacity on its towers and in its data centers, providing it with very predictable cash flow. It expects to produce more than $4.5 billion in adjusted funds from operations (FFO) this year.
That’s more than enough money to cover its $3 billion in planned dividend payments (a 10% increase on a per-share basis for 2023). That will enable it to retain nearly all the cash needed to finance its $1.7 billion of expected capital spending to expand its U.S. data center business and global tower portfolio. Those investments will help grow its cash flow in the future.
By nearly fully funding capital spending with retained cash, American Tower will strengthen its already solid balance sheet. The company’s strong financial and growth profile should enable it to continue increasing its dividend, which it has done every year since becoming a REIT in 2012.
The power to keep growing
Brookfield Renewable’s dividend is currently up to 4.9%. The global renewable-energy leader backs that payout with very durable cash flows. It sells the power its facilities produce under long-term power purchase agreements (PPAs) with utilities and large corporate buyers. The company also has a strong investment-grade balance sheet.
The clean power company expects the cash flows from its existing portfolio to grow by 4% to 7% per year, primarily powered by higher electricity prices. Meanwhile, investments to expand its portfolio (development projects and acquisitions) could drive FFO per share growth into the double digits. Brookfield expects to fund those investments with retained cash flow, asset sales, and its strong balance sheet.
Brookfield Renewable’s quartet of growth drivers should give it plenty of power to continue increasing the dividend. It aims to boost its payout by 5% to 9% annually. For the past dozen years, it has increased its dividend by at least 5% annually.
The legacy should continue
Kenvue is a relative newcomer to the public markets. It completed its initial public offering earlier this year and recently initiated a dividend. That payout yields 3.7% at the recent share price.
While Kenvue is new to the public markets, it’s not a startup. It’s the former consumer health product division of healthcare behemoth Johnson & Johnson. The iconic company recently completed the separation of that business by spinning off most of its remaining stake to shareholders.
Kenvue is the world’s largest pure-play consumer health products company by revenue. Its iconic brands include Band-Aid, Listerine, and Tylenol. Demand for those products is durable and growing, so Kenvue should be able to continue the legacy of Johnson & Johnson by paying a growing dividend. The healthcare giant has increased its payout for 61 straight years.
Top-notch dividend growth stocks
American Tower, Brookfield Renewable, and Kenvue have very resilient business models that generate durable cash flows. That gives them the money to reinvest in growing their businesses and increasing their dividends. Those attractive and growing payouts make this trio ideal for those seeking lasting passive income streams.
Matthew DiLallo has positions in American Tower, Brookfield Renewable, Brookfield Renewable Partners, and Kenvue. The Motley Fool has positions in and recommends American Tower and Brookfield Renewable. The Motley Fool recommends Brookfield Renewable Partners and Johnson & Johnson. The Motley Fool has a disclosure policy.