I’m a huge fan of dividend stocks. Not only do you generate passive income, but you have in the past that too S&P 500 with less volatility. Because of this, I routinely buy dividend payers to mitigate some of the effects of my growth-oriented investments.
Three Dividend stocks which are currently at the top of my purchase list Clearway energy (NYSE: CWEN)(NYSE: CWEN.A), Crown Castle International (NYSE: IHK), and Invitation houses (NYSE: INVH). Because of this, I would now increase my position in one of these dividend payers.
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A strong future
Clearway Energy focuses on running a clean energy infrastructure. The company owns natural gas Power plants, renewable energy Generating plants and remote energy plants. It sells the generated energy to end users like Utilities and commercial customers with long-term fixed-rate contracts. This makes it possible to generate a relatively stable cash flow. Clearway distributes the majority of this money through a dividend that is currently underway results around 5%, well above the S&P 500 average of 1.3%.
As good as this payout is right now, it should be even better in the future. That’s because Clearway expects to increase its dividend at an annual rate of 5 to 8%. This plan is based on the clean energy company’s solid financial profile and numerous investment opportunities. It has a strategic partnership with a major renewable energy developer that offers a steady stream of acquisition options. In addition, it has the financial flexibility to do business with third parties when the right opportunity presents itself.
With an attractive current yield and clearly visible growth prospects, Clearway Energy is a great dividend stock. That one-two punch should allow the energy company to generate compelling overall 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 the communication infrastructure. It owns and operates cell towers, small cell sites, and fiber optic cables in the United States, and leases space on that infrastructure to cellular operators to support their communications networks. These contracts provide the REIT with steady cash flow to keep its dividend at 2.6%.
Crown Castle’s infrastructure is critical to the introduction of 5G Networks across the country. The company estimates it will take a decade to build the tiny cells and fiber optic cables needed to support this faster network. Because of this, Crown Castle believes it can continue to grow its infrastructure portfolio, which should translate into annual dividend growth of 7% to 8% over the coming years.
Combine Crown Castle’s above-average yield on electricity with its enticing growth prospects and the REIT appears poised to deliver strong total returns in the years to come as it capitalizes on the 5G megatrend.
Get into the best markets
Invitation Homes is a REIT focused on owning and renting single family homes. This lifestyle is becoming increasingly popular with millennials who prefer the flexibility and freedom of renting but want more space than living in an apartment. This has allowed Invitation Homes to see soaring rental rates and generate lots of cash to support its 1.7% dividend.
One reason for this lower return is that Invitation Homes keeps around half of its cash flow to expand its rental apartment portfolio. The company plans to spend $ 1 billion this year to expand its portfolio and focus on fast-growing markets along the west coast and sunbelt region.
The REIT’s focus on investments in high-growth markets enables it to benefit from strong rental growth rates and above-average property price increases. This helps increase shareholder value by increasing cash flow, which enables Invitation Homes to steadily increase its dividend. These factors position the company in a position to generate above-average returns in the coming years as the demand for single-family homes increases in the face of the tight housing market.
Great dividend growth stocks
Clearway Energy, Crown Castle, and Invitation Homes make ideal dividend stocks. Not only do they offer above-average returns, but they also benefit from long-term growth trends that should enable them to steadily grow their dividends. This growing stream of income should allow these dividend stocks to generate strong overall returns, which is why I would buy any of them now.
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Matt DiLallo owns shares of Clearway Energy, Inc., Crown Castle International, and Invitation Homes Inc. The Motley Fool owns shares of and recommends Crown Castle International and Invitation Homes Inc. The Motley Fool has a Confidentiality Policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.