Our favorite dividend stocks for 2022 and beyond

Dividend shares have always been excellent investments. They have consistently outperformed non-payers, with the best returns coming from companies that consistently increase their dividend payouts.

For this reason, we are always on the lookout for good dividend-paying stocks. With that in mind, we asked some of our contributors for their favorite dividend-paying stocks for 2022 and beyond. here’s why Enbridge (NYSE: ENB), NextEra Energy Partners (NYSE:NEP), and Enterprise Product Partners (NYSE:EPD) topped their lists.

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Investing for dividend growth

Reuben Gregg Brewer (Enbridge): North American midstream giant Enbridge recently announced a 3% annual increase in its dividend. It’s not particularly exciting, but over the past 27 years, annualized dividend growth has been around 10%. That’s exciting! Year-over-year increases fluctuate and depend in part on other options for cash generated by the business. For example, the yield today is at an all-time high of 6.6%, so management explained on Enbridge’s third quarter earnings conference call that they do not believe growth of the company’s dividends was recognized by investors. So it makes more sense to put that money to work in another way.

ENB Chart

ENB data by YCharts

This environment means that Enbridge is instead buying back its shares, which management believes are undervalued, and investing capital in its various businesses. Notably, on the capital investment front, it is increasingly investing cash in its renewable energy business, which positions it well for the changing future of the energy sector. And while it does all of these things, the company’s payout ratio will decrease as the company grows and the number of shares decreases. This, in turn, will give Enbridge the breathing room to kick-start dividend growth when the market finally recognizes the value offered here. So, for now, it’s a yield story, but it could soon become a dividend growth story again. However, if you buy now, you can get both high yield and dividend growth.

Strong future dividend growth

Matt DiLallo (NextEra Energy Partners): NextEra Energy Partners offers dividend investors the best of both worlds: income and growth. Clean energy infrastructure company offers attractive offer dividend yield. At its current rate of almost 3.6%, it is more than double that of the S&P500.

This payout is on reasonably solid ground. NextEra Energy Partners is generating relatively stable revenues supported by long-term fixed rate contracts on its renewable energy assets and natural gas pipelines. It pays a reasonable amount of this cash flow to support its high yield dividend, anticipating a distribution of dividends ratio in the low range of 80% in 2022. On top of all that, it has a strong balance sheet with great financial flexibility.

Meanwhile, NextEra Energy Partners foresees significant growth ahead. The company currently plans to increase its dividend at an annual rate of 12-15% until at least 2024. This is the fastest rate among dividend-focused clean energy infrastructure companies.

The company has several growth drivers, including the acquisition of clean energy assets from third parties and its parent company, utility NextEra Energy. NextEra has a large and growing portfolio of clean energy infrastructure assets that it can entrust to the partnership. Meanwhile, with the growing demand for clean energy as the global economy races to offset the potential impact of climate change, NextEra Energy Partners should not miss additional investment opportunities. It also has the financial flexibility to continue its expansion, with several financial partners willing to provide low-cost capital to close deals.

NextEra Energy Partners is one of my favorite dividend stocks because it offers a high dividend yield and a high growth rate. These two factors should give it the power to generate above-average returns in 2022 and beyond.

High yield, high growth potential

Neha Chamaria (Enterprise Product Partners): In a year of skyrocketing oil prices, Enterprise Products Partners barely got the market love – the stock ended 2021 with a muted 12% gain. It’s not really hard to figure out why this happened. Investors in the energy sector have shifted focus and pumped money into upstream oil and gas stocks that stand to benefit directly from higher oil prices, unlike a midstream firm Enterprise Products Partners.

However, the market ignored the fact that Enterprise Products Partners also steadily increased its distributable cash flow (DCF), which could support and bigger dividends in 2021. Earlier this month, the company raised its dividend by 3.3%, marking its 23rd consecutive annual dividend increase. This percentage increase in dividends may not appeal to investors, but remember that the stock is also yielding a whopping 7.7% right now and generating enough cash flow to comfortably cover its dividends.

In fact, Enterprise Products Partners could very well end its 2021 fiscal year with one of its highest DCFs ever. And 2022 could be an even bigger year given the company’s latest move: Enterprise Products Partners is set to acquire Navitas Midstream Partners for $3.25 billion in cash in a deal expected to be immediately accretive to its DCF. Growth prospects make Enterprise Products Partners, with its high dividend yield, an attractive dividend stock to hold for 2022 and beyond.

10 stocks we like better than Enbridge
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Matthew DiLallo owns Enbridge, Enterprise Products Partners, NextEra Energy and NextEra Energy Partners. Neha Chamaria has no position in the stocks mentioned. Reuben Gregg Brewer owns Enbridge. The Motley Fool owns and recommends Enbridge. The Motley Fool recommends Enterprise Products Partners and NextEra Energy. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Garland K. Long