Key Points
-
Shares of Brookfield have tumbled even though it expects to deliver double-digit annual earnings growth for the next five years.
-
Realty Income has taken several steps to accelerate its growth rate.
-
Main Street Capital has slumped on unfounded private credit concerns.
- 10 stocks we like better than Brookfield Renewable ›
The S&P 500 has soared 20% over the past year. As a result, dividend yields are down, with the S&P 500’s yield near its lowest level in more than 20 years at around 1.1%.
However, not all dividend stocks have kept pace with the broader market’s rally. Several are down sharply from their 52-week high, even though their businesses continue to perform well, enabling them to keep growing their higher-yielding dividends. Here are three high-yielding stocks that income-seeking investors should load up on right now.
Brookfield Renewable
Shares of Brookfield Renewable (NYSE: BEPC)(NYSE: BEP) have fallen nearly 20% below their 52-week high. That has pushed the top renewable energy dividend stock‘s yield up to nearly 4.5%. That’s a compelling level for such an excellent dividend growth stock.
Brookfield Renewable has increased its dividend by at least 5% each year since 2011. The leading global renewable energy company expects to grow its payout at a 5% to 9% annual rate going forward. The company should have plenty of power to achieve its dividend growth target. It generates very stable cash flow (90% contracted for an average of 12 years), which it expects to grow by more than 10% annually through at least 2031.
The company’s growth drivers include inflation-linked contractual rate increases, margin enhancement activities (e.g., securing higher market rates as legacy contracts expire), development projects, and acquisitions. Brookfield expects to deploy $9 billion to $10 billion in capital over the next five years, split between development projects ($850 million annually) and acquisitions. With a lower valuation, higher yield, and robust growth prospects, Brookfield Renewable looks like a no-brainer buy right now.
Realty Income
Shares of Realty Income (NYSE: O) have dipped more than 5% below their 52-week high. That has pushed the leading global real estate investment trust’s (REIT) dividend yield up over 5%. That’s a compelling level for a company with Realty Income’s dividend growth track record. The REIT has raised its monthly dividend payment 135 times since its public market listing in 1994, growing it at a 4.1% compound annual rate.
Realty Income’s stock price has dipped even though the REIT’s growth prospects have improved over the past year. It has formed a series of private capital partnerships that have provided it with new sources of capital and growth. For example, it formed a strategic partnership with Singapore’s sovereign wealth fund, GIC, which included a cornerstone investment in its U.S. Core Plus Fund, the formation of a more than $1.5 billion programmatic joint venture (JV) to invest in high-quality build-to-suit logistics real estate, and a construction financing and takeout commitment of a Mexican industrial portfolio (its first investment in that country).
The REIT also recently took a major step toward capitalizing on the massive data center investment opportunity by forming another programmatic JV. It will invest up to $1.4 billion for a 45% equity stake in three data centers in Northern Virginia, with the opportunity to make future investments across the U.S. and Europe. These JVs position Realty Income for faster future growth, which the market isn’t appreciating.
Main Street Capital
Main Street Capital (NYSE: MAIN) stock has tumbled nearly 25% from its 52-week high amid concerns about the private credit market. As a result, the business development company’s (BDC) dividend yield has spiked.
Main Street Capital pays two dividends. It pays a monthly dividend set at a sustainable level that it aims to steadily grow. The BDC has grown this payment by 141% since its 2007 IPO, including a dozen increases since the end of 2021. Additionally, Main Street Capital periodically pays supplemental quarterly dividends. It has made these payments for 19 consecutive quarters, maintaining the same rate since early 2023. The current annualized rate on these dual payments is $4.38 per share, putting Main Street Capital’s yield over 8.5% at the recent share price.
Despite concerns facing other private credit providers, Main Street Capital’s loan portfolio is in excellent shape, with minimal exposure to the troubled software sector (2% of its portfolio). As evidence, the company recently exited an investment, realizing a $46.4 million gain on its equity investment. Meanwhile, the BDC continues to find attractive investment opportunities ($319 million of new or increased commitments in the second quarter). Main Street’s strong, growing portfolio should continue to support its dividend payments.
It’s time to buy these high-yielders
Brookfield Renewable, Realty Income, and Main Street Capital are all down from their 52-week highs. That has pushed up their dividend yields to more attractive levels. Those dips are buying opportunities. They’ll enable investors to lock in higher yields and position them to capitalize on the upside as these stocks recover.
Should you buy stock in Brookfield Renewable right now?
Before you buy stock in Brookfield Renewable, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Brookfield Renewable wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $395,679!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,294,805!*
Now, it’s worth noting Stock Advisor’s total average return is 929% — a market-crushing outperformance compared to 211% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
Matt DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners, Main Street Capital, and Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
