Consider Why There's No Reason to Delay Purchasing These leading Stocks by 2025
Investing is filled with funny phrases, like "Past performance doesn't guarantee future results." But understanding past success can offer clues about what might drive future performance. A prime example is dividend-paying stocks versus non-payers. Over the past 50 years, dividend stocks outperformed non-payers by more than 2-to-1. Specifically, they yielded an average annual total return of 9.2%, compared to 4.3% for non-payers.
Dive into the details, and you'll notice a significant difference between dividend growers, maintainers, cutters, and eliminators. Companies that can increase their dividends consistently have delivered impressive returns, averaging 10.2% compared to 6.7% for maintainers and a negative return of 0.6% for cutters and eliminators. So, the wise choice is to focus on owning dividend-growing companies.
Now, let me introduce you to two top dividend stocks that will set your investment bucket buzzing in 2025 and beyond: Realty Income and Brookfield Infrastructure.
Realty Income: The Silent Dividend Powerhouse
Realty Income, a real estate investment trust (REIT), is a star performer in the dividend growth arena. Since its IPO 30 years ago, it has increased its dividend 128 times and paid it out consistently for 109 quarters in a row. Its compound annual dividend growth rate is an impressive 4.2%, contributing to an average compound annual total return of 14.1%. Though past performance isn't a guarantee, Realty Income is in a strong position to keep climbing the dividend mountain.
Several factors support Realty Income's chance of continuing its upward trend.
- A robust and resilient real estate portfolio boasting approximately 15,500 net-leased properties in retail, industrial, gaming, and other businesses owned by leading global companies.
- Its conservative dividend payout ratio of 75% of its adjusted funds from operations (FFO), giving it the financial resources to invest in new projects and grow its dividend.
- Internal growth drivers like its leased properties should add around 2% to its FFO per share annually.
- A strong balance sheet, ensuring ample financial flexibility to fund new investments.
- A recently launched private fund management platform, providing access to GI's capital and investment returns.
With a dividend yield of around 6% and earnings growing at a mid-single-digit rate, Realty Income has the potential for delivering double-digit total returns annually.
Brookfield Infrastructure: The Multinational Might
Brookfield Infrastructure is a globally diverse operator with interests in utilities, energy midstream, transportation, and data. Since its formation in 2009, it has grown its dividend at a 9% compound annual rate, leading to a 13.3% total annual return. Who says consistent dividend growth isn't appealing?!
The company's financial health and growth prospects are solid.
- Long-term contracts or regulated rate structures account for 85% of its FFO, providing a reliable cash flow source. Inflation adjusters account for an additional 3% to 4% annual increase in FFO.
- Conservative dividend payout ratio of 60% to 70% of its FFO, affording the company financial flexibility to invest in new projects and maintain its dividend.
- Strong balance sheet, positioned for external funding and investment opportunities.
Brookfield's internal growth drivers include numerous expansion projects and acquisition opportunities in its pipeline, which should support a double-digit annual FFO growth rate of more than 10%. With a dividend yield of 4% and earnings growing more than 10% annually, this multinational might just serve up mid-teen total returns.
Final Takeaway
Dividend growth stocks have historically delivered stellar long-term total returns, and Realty Income and Brookfield Infrastructure are no exceptions. With strong financial health, value propositions, and future growth potential, you'll want to consider adding these two pillars of dividend growth to your portfolio in 2025.
Investing in dividend-growing companies like Realty Income and Brookfield Infrastructure can significantly enhance your financial growth. By focusing on these stocks, you're not just acquiring income from dividends but also potentially benefiting from their capital appreciation.
Investing wisely in Realty Income and Brookfield Infrastructure could potentially help you achieve double-digit total returns, given their strong financial health, consistent dividend growth, and promising future expansion prospects.
