3 Top Dividend Stocks Down 20.7% to 43.2% to Buy Now for Years of Passive Income

This year has been a brutal period for investors. All three major market indexes have declined at least 20%, the traditional definition of a bear market. Meanwhile, many stocks have fallen even further.

If there is a silver lining to this year's downdraft in the stock market, it's providing investors with some great long-term investment opportunities. For example, dividend yields move inversely to stock prices. That means some top-notch dividend stocks currently offer even more attractive passive income streams. Three top dividend stocks that are down sharply and look like great buys right now are Brookfield Renewable (NYSE: BEPC)(NYSE: BEP), Digital Realty (NYSE: DLR), and Enbridge (NYSE: ENB).

The power to continue growing the payout

Shares of Brookfield Renewable are currently down 22.5% from their 2022 high. That decline has pushed up the company's dividend yield to 3.8%.

That payout's on a very sustainable foundation. The renewable energy company generates very steady cash flow by selling power under long-term, fixed-rate power purchase agreements (PPAs). It paid out about 76% of its funds from operation (FFO) during the first half of this year, within range of its 70% long-term target. That gives it some cushion while allowing it to retain cash to invest in its vast development pipeline.

Brookfield sees a combination of development projects, inflation escalations on its PPAs, and margin enhancement activities organically growing its FFO per share at a 6% to 11% annual rate through at least 2026. Meanwhile, it sees M&A activities adding up to 9% to its bottom line each year. Those drivers should enable Brookfield to grow its dividend by 5% to 9% per year. The company has delivered dividend growth of at least 5% annually for the last 11 straight years.

Data-driven dividend growth

Digital Realty's stock price has plunged 44% from its high earlier this year. Weighing on shares has been concerns that the economy will slow and impact demand for data infrastructure. That dramatic sell-off has pushed its dividend yield up to 5%.

That's an enticing payout for a company with Digital Realty's dividend track record. The real estate investment trust (REIT) has increased its payout every year since its initial public offering. It most recently increased its dividend by 5% in March, pushing its streak to 17 straight years.

That income stream should continue growing in the future. Digital Realty has a reasonable dividend payout ratio for a REIT (75% of its adjusted FFO in the second quarter). It also has a strong investment-grade balance sheet. Those factors give it the financial flexibility to expand its data center portfolio via developments and acquisitions. It currently has 41 development projects underway, with half of that capacity already pre-sold. Meanwhile, it recently expanded its presence in Africa by acquiring a majority stake in Teraco. These investments should grow its cash flow, enabling it to continue increasing its dividend.

The fuel to keep growing

Shares of Enbridge have fallen more than 20% this year. That decline has boosted the energy company's yield up over 7%.

That big-time payout is on rock-solid ground. Enbridge's pipeline-utility business model generates very stable cash flow backed by long-term contracts and government-regulated rate structures. Meanwhile, it pays out about 65% of those funds via its dividend. That gives it some cushion and allows it to retain earnings for new investments.

Enbridge currently has an extensive backlog of pipeline, utility, and renewable energy projects under construction and in development. It expects these investments will grow its cash flow per share at a 5% to 7% annual rate through at least 2024. Meanwhile, it has longer-term projects underway to continue growing well into the future.

That should enable Enbridge to continue growing its dividend. The company delivered its 27th straight year of increasing its payout in 2022.

These top-notch dividend stocks are on sale

Shares of Brookfield Renewable, Digital Realty, and Enbridge have tumbled more than 20% this year, driven down by the sell-off in the stock market. That's pushed their dividend yields up to attractive rates. And that means investors can lock in some compelling passive income streams that should continue growing over the coming years.

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Matthew DiLallo has positions in Brookfield Renewable Corporation, Brookfield Renewable Partners, Digital Realty Trust, and Enbridge. The Motley Fool has positions in and recommends Brookfield Renewable Corporation, Digital Realty Trust, and Enbridge. 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.


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