3 dividend-paying stocks I would buy now
I am a big fan of dividend stocks. Not only do they generate passive income, but they have also historically outperformed the S&P 500 with less volatility. That’s why I regularly buy dividends to help mitigate some of the effects of my growth-oriented investments.
Three dividend stocks that are currently at the top of my shopping list are Clearway Energy (NYSE: CWEN)(NYSE: CWEN.A), Crown Castle International (NYSE: CCI), and Houses Invitation (NYSE: INVH). Here’s why I would add my position in one of these dividend payers right now.
A powerful future
Clearway Energy is focused on operating clean energy infrastructure. The company owns natural gas power stations, renewable energy production facilities and district energy assets. It sells the energy it produces to end users like utilities and business customers under long-term fixed rate contracts. This allows it to generate relatively stable cash flow. Clearway distributes most of this money to investors via a dividend which currently yields around 5%, well above the S&P 500’s 1.3% average.
As good as that payout is right now, it should be even better in the future. This is because Clearway expects to increase its dividend at an annual rate of 5-8%. This plan is based on the clean energy company’s strong financial profile and numerous investment opportunities. It has a strategic partnership with a developer of large-scale renewable energy projects, offering a constant stream of acquisition options. In addition, it has the financial flexibility to enter into agreements with third parties when the right opportunity arises.
With an attractive current yield and very visible growth prospects, Clearway Energy is an excellent dividend-paying stock. This double blow is expected to enable the energy company to deliver compelling total returns in the years to come as the global economy shifts to cleaner energy sources.
Connected to a megatrend
Crown Castle is a real estate investment trust (REIT) focused on communication infrastructure. It owns and operates cell phone towers, small cell sites, and fiber optic cables in the United States and leases space on this infrastructure to mobile operators to support their communications networks. These contracts provide the REIT with stable cash flow to maintain its 2.6% dividend.
Crown Castle infrastructure is critical to the deployment of 5G networks across the country. The company estimates that it will take a decade to build the small cells and fiber optic cables needed to support this faster network. For this reason, Crown Castle believes it can continue to expand its infrastructure portfolio, which is expected to result in annual dividend growth of 7-8% over the next several years.
Combine Crown Castle’s current above-average return with its enticing growth prospects, and the REIT looks set to deliver strong total returns in the years to come as it benefits from the 5G megatrend.
Position yourself in the best markets
Invitation Homes is a REIT focused on the ownership and rental of single family homes. This lifestyle is becoming increasingly popular among millennials who prefer the flexibility and freedom to rent but want more space than apartment living. This allowed Invitation Homes to capture increasing rental rates, which allowed it to generate a lot of cash to support its 1.7% dividend.
One of the reasons for this lower return is that Invitation Homes is retaining about half of its cash flow to expand its rental housing portfolio. The company aims to spend $ 1 billion this year to grow its portfolio, focusing on fast-growing markets along the West Coast and the Sun Belt region.
The REIT’s focus on investing in high growth markets enables it to benefit from high rental growth rates and above average house price appreciation. This helps to increase shareholder value by increasing its cash flow, allowing Invitation Homes to steadily increase its dividend. These factors position the company to produce outsized returns in the years to come as demand for single-family rentals increases, given the tight housing market.
Big dividend growth stocks
Clearway Energy, Crown Castle and Invitation Homes stand out as ideal dividend-paying stocks. Not only do they offer above average returns, but they also benefit from long-term growth trends, which should allow them to steadily increase their dividends. This growing income stream should allow these dividend paying stocks to produce strong total returns, which is why I would buy any of them right now.
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! Questioning 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.