These companies should provide their investors with a growing stream of dividend income.
I'm a huge fan of dividend stocks. I love to collect the passive income they send me. On top of that, dividend stocks have historically outperformed non-payers by a wide margin (9.2% average-annual total return versus 4.3% since 1973, according to Ned Davis Research and Hartford Funds).
Dividend growers have delivered the best returns (10.2%). That's why I focus on companies with excellent histories of dividend growth that seems highly likely to continue. Brookfield Infrastructure (BIPC 1.23%) (BIP 1.70%), NextEra Energy (NEE -1.41%), and Prologis (PLD 0.31%) currently sit at the top of my buy list. Here's why they're great dividend stocks to buy this October.
Brookfield Infrastructure has been a terrific dividend stock over the years. The global-infrastructure operator has grown its payout at a 9% compound annual rate over its 15-year history. It currently offers a nearly 4%-yielding dividend covered by a conservative 67% dividend-payout ratio.
The company expects to continue growing its dividend. It's targeting to increase it at a 5% to 9% annual rate. Supporting that view is its robust growth profile. Brookfield Infrastructure expects to grow its funds from operations (FFO) per share by more than 10% annually, fueled by organic growth and accretive acquisitions.
Investors are getting that strong growth profile at an attractive value this October. Brookfield Infrastructure currently trades at around 14.1 times its FFO. That's well below its historical average of 15.5 times and the 16.5 times multiple it has traded at over the last five years. With a high yield, strong growth prospects, and a cheap price, Brookfield Infrastructure could produce robust total returns in the coming years.
NextEra Energy is an elite dividend-growth stock. It has increased its payout for 30 straight years. The utility has grown its dividend at a roughly 10% annual rate over the last 20 years. It expects to increase its payout (which currently yields nearly 2.5%) by around 10% per year through at least 2026.
Two factors are powering NextEra's dividend-growth plan. It has a low dividend-payout ratio (59% compared to a peer group average of 65%). On top of that, it expects its adjusted earnings-per-share (EPS) growth to be at or near the top end of its 6% to 8% annual range through 2027.
Several catalysts are helping drive the healthy earnings-growth outlook. It's benefiting from operating the largest electric utility in Florida, which has abundant sunshine (great for solar energy) and a growing population. In addition, it's investing heavily to expand its renewable-energy business outside the state, where it's capitalizing on robust demand. As a leader in renewables, NextEra Energy should continue growing at a healthy rate for years to come.
Prologis has delivered above-average dividend growth over the years. The leading industrial real estate investment trust (REIT) has grown its dividend at a 13% compound annual rate during the last five years. That's more than double the average of the S&P 500 (5%) and other REITs (5%).
The REIT should be able to continue increasing its more-than 3%-yielding dividend at an above-average rate. It's capitalizing on robust demand for warehouse space, which is keeping occupancy levels high and driving up rental rates. The company expects that rent growth alone (annual rent escalations and higher market rates as existing leases expire) will drive high single-digit annual same-store income growth through 2026. Add in development projects (which include investments in data centers), and the REIT should grow its core FFO per share by 9% to 11% annually. Meanwhile, there's additional upside potential from completing accretive acquisitions, which have added an average of 1.5% to its FFO per-share growth rate over the last few years.
Brookfield Infrastructure, NextEra Energy, and Prologis all offer attractive dividends. On top of that, they all have strong growth prospects, which should enable them to continue increasing their payout at a healthy pace. That puts them in an excellent position to produce above-average total returns, making them great dividend stocks to buy this month.