If you like dividends, you should love these 3 stocks

By | December 24, 2023

a money bag on a pile of cash

a money bag on a pile of cash

There’s a lot to like about dividend stocks. They provide their owners with passive income. Furthermore, they have historically delivered total returns that outperform the market.

Dividend-loving investors are typically looking for another income producer to add to their portfolios. Southern Company (NYSE: DUS), Brookfield Asset Management (NYSE: BAM)And Darden Restaurants (NYSE:DRI) are three top performers dividend stocks which income seekers should love as they offer higher yielding payouts that should grow in the future. That makes them great income stocks to buy and hold for the long term.

Adding more power to grow the dividend

Southern Company currently offers a 4% dividend. That is more than double S&P500‘S dividend yield (recently around 1.5%).

The utility has a long history of paying dividends and has been paying dividends equal to or greater than the previous quarter’s level for 75 years. Meanwhile, 2023 marked the 22nd year in a row that it has increased its dividend.

Southern Company has enough power to continue increasing its dividend as well. The company has invested more than $10 billion in building two new ones nuclear electricity production units (Vogtle 3 and 4). The third unit was commissioned earlier this year, while unit four should begin commercial operations early next year.

Southern Company estimates that these plants will generate $700 million in operating cash flow annually. That will give the country more money to invest in expanding its utility business (including building out its Southern Power renewable energy platform) and increasing its dividend.

Rapid growth ahead

Brookfield Asset Management currently pays a dividend of 3.2%. The leading global alternative asset manager has big plans to increase its payout.

The company expects to grow compensation-related revenues 15% to 20% annually in the coming years. It plans to pay out more than 90% of that recurring income in dividends, implying it will need to increase its dividend at a similar pace.

Brookfield aims to grow its fee-bearing capital base to more than $1 trillion by 2028, which is more than double its $440 million fee-bearing capital base. assets under management (AUM) at the end of the third quarter. That should more than double fee-related revenues by 2028 (from $2.2 billion to $4.8 billion).

Brookfield’s ability to attract larger flagship funds and launch new funds is driving these growth prospects. For example, it recently raised a record $30 billion for its latest flagship infrastructure fund (Brookfield Infrastructure Fund V). That was 40% larger than the previous fund (BIF IV) and exceeded the $25 billion target.

Brookfield also recently launched its first Catalytic Transition Fund (focused on sustainable investments in emerging and developing markets) and its second Global Transition Fund. These and other new funds will grow Brookfield’s fee income, allowing the company to quickly increase its dividend.

A tasty dividend

Darden Restaurants currently offers a dividend yield of 3.2%. The restaurant operator has steadily increased its dividend over the years. While the company reduced the payment in 2020 due to the impact of the pandemic on its operations, it returned the payment to pre-pandemic levels in 2021 and the rate has increased in recent years. The company gave its investors an 8% raise earlier this year.

The restaurant operator should continue to increase its dividend in the future. The company continues to expand its restaurant count and same-store sales, giving it more cash to pay dividends, and plans to open 50 new restaurants in fiscal 2024, while increasing same-store sales by 2, 5% to 3.5% grow.

In addition to organic growth, Darden recently acquired Ruth’s Hospitality Group in a $715 million deal. The transaction added 154 Ruth’s Chris locations. The company expects the deal to increase earnings per share in fiscal 2024 while adding a new concept to its growing restaurant menu, positioning it for more organic growth.

Attractive and increasing revenue streams

Southern Company, Brookfield Asset Management, and Darden Restaurants offer dividend yields that are more than double that of the S&P 500. Furthermore, these companies should increase these payouts in the future. That makes them great options for dividend-loving investors, as these companies should offer a growing income stream with the potential to generate total returns that beat the market.

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Matthew DiLallo holds positions in Brookfield Asset Management. The Motley Fool holds positions in and recommends Brookfield Asset Management. The Motley Fool has a disclosure policy.

If you like dividends, you should love these 3 stocks, originally published by The Motley Fool

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