While 2020 has been a lousy year for dividend stocks because of the impact COVID-19 has had on the economy, -- which forced many companies to slash or suspend their dividends -- not all payouts are at risk. Several high-quality payouts remain, which gives income-seeking investors some enticing options.
Two dividend standouts are infrastructure operator Brookfield Infrastructure (NYSE: BIP)(NYSE: BIPC) and industrial REIT Prologis (NYSE: PLD). Here's why dividend-loving investors won't want to miss this duo.
A resilient dividend supported by crucial infrastructure
Brookfield Infrastructure currently pays an attractive 4.5%-yielding dividend, which is more than double the market's average. That payout is exceptionally durable because Brookfield generates stable revenue backed by long-term, fixed-rate contracts and government-regulated rates. Meanwhile, the company pays out a conservative amount of its steady cash flow -- usually between 60% to 70% -- and has a top-notch balance sheet featuring an investment-grade credit rating and lots of liquidity (cash and borrowing capacity).
Those features give it the flexibility to continue paying dividends and the funding to expand its operations. The company currently has several hundred million dollars of organic expansion projects under way across its platforms and a sizable acquisition pipeline. While one acquisition recently fell apart, this year's economic downturn could yield new opportunities as cash-strapped companies and governments seek to sell infrastructure assets.
Acquisitions aside, Brookfield believes that its organic growth drivers alone should support 5% to 9% yearly dividend growth. That outlook suggests the company's payout will continue its annual upward trend, which has been the case since Brookfield's inception more than a decade ago.
A top-quality divided backed by industrial real estate
Prologis pays a slightly above average dividend that currently yields 2.3%. Like Brookfield's dividend, Prologis' payout has been steadily climbing over the past several years. The REIT has grown it at a 10% compound annual rate over the last five years, which is well above the REIT-sector average of 6%.
The logistics company backs its payout with a very reliable cash flow stream. Whereas some REITs struggled to collect rent this year because of COVID-19, Prologis has received more than 90% of what it billed. Furthermore, the collection rate has been steadily improving and coming in above its expectations. The company recently boosted its full-year guidance, which has it on track to generate enough cash to cover its dividend with about $1 billion to spare. Add that to its A-rated balance sheet, which it backs with a low leverage ratio, and Prologis' dividend is on one of the firmest foundations in the REIT sector.
That top-notch financial profile gives Prologis the financial flexibility to continue expanding its industrial real estate portfolio. The company expects to start $800 million to $1.2 billion of development projects this year and acquire between $500 million and $600 million of logistics buildings. These expansion-related investments will lay the foundation for future dividend growth.
Great all-around dividend stocks
Brookfield Infrastructure and Prologis offer dividend investors above-average yields backed by top-notch financials. Their payouts should have no problem enduring the current downturn. Even better, thanks to their strong financials, these companies have the flexibility to continue expanding, which should give them the fuel to continue growing their payouts in the coming years. That makes them ideal options for investors who love dividends.
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Matthew DiLallo owns shares of Brookfield Infrastructure and Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure and Brookfield Infrastructure Partners. 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.