Interest rates have been riding high for the past two years. While that's not great for borrowers, it's an excellent opportunity for those seeking higher-yielding investments. Low-risk fixed-income options, like government bonds and bank certificates of deposit (CDs), currently yield between 4% and 5%. That can provide investors with nice income streams.
However, those higher yields likely won't last much longer. The Federal Reserve appears poised to begin lowering rates later this year, making right now a prime time to lock in yield. One of the best opportunities is high-yield dividend stocks. Several companies offer yields over 4%.
Meanwhile, unlike bonds and bank CDs, many of those payouts should rise in the coming years. That sets their investors up to earn a potential lifetime of increasingly lucrative passive income. Four great options to grab right now are Brookfield Renewable (NYSE: BEPC)(NYSE: BEP), Kenvue(NYSE: KVUE), Mid-America Apartment Communities (NYSE: MAA), and Williams(NYSE: WMB).
Generating lots of income
Brookfield Renewable currently yields around 5%, several times higher than the S&P 500's dividend yield (1.3%). The leading renewable energy dividend stock's payout is as sustainable as it comes.
The company generates very stable cash flow by selling most of the renewable power it produces to utilities and large corporate buyers under long-term contracts. Those agreements typically link power rates to inflation. Because of that, Brookfield's steady cash flow should rise by about 2% to 3% per year. Meanwhile, it expects margin enhancement activities to boost the bottom line of its existing assets by around 2% to 4% annually.
Brookfield is also spending heavily tocapitalize on the renewable energy megatrend. It's investing in a vast and growing pipeline of development projects and routinely makes accretive acquisitions. Add these catalysts to its other growth drivers, and Brookfield Renewable expects to grow its cash flow per share by more than 10% annually through at least 2028 (with lots more growth ahead). That should give it plenty of power to deliver on its plan to increase its dividend by 5% to 9% annually. The company has grown its payout at a 6% compound annual rate since 2001.
A healthy dividend heritage
Kenvue currently yields around 4.5%. The leading consumer health company generates lots of stable cash flow, driven by durable demand for its iconic brands, which include Listerine, BAND-AID, and Tylenol.
The company recently increased its dividend by 2.5%, its first since its spin-off from healthcare behemoth Johnson & Johnson last year. That continues the legacy left by its former parent, which has increased its dividend for more than 60 consecutive years.
Kenvue is in a solid position to continue growing its payout. It expects rising demand for its legacy products to drive steady organic revenue growth. Meanwhile, it's using some of its strong cash flow to invest in developing innovative products and repay debt (reducing interest expenses). These cash flow growth drivers, as well as the likelihood of making accretive acquisitions, should enable Kenvue to follow its former parent's example of steadily increasing its dividend.
Healthy demand should keep driving this dividend higher
Mid-America Apartment's dividend yields more than 4%. The residential real estate investment trust (REIT) generates steadily rising cash flow from rental income on its portfolio of apartments across the Southeast. The company focuses on growing metro areas, which helps keep occupancy high and rents rising.
The REIT is also investing to grow its portfolio. It currently has five new multifamily development projects under construction and plans to start four to six more over the next two years. Mid-America's strong balance sheet gives it the financial flexibility to buy apartment communities and more land to support future developments.
Those drivers should enable the REIT to continue increasing its dividend. Late last year, it raised its payout by 5%, marking its 14th straight year of dividend growth.
Lots of fuel to increase its payout
Williams' dividend yields 4.5%. The natural gas pipeline giant generates very stable cash flow to cover that payout backed by long-term contracts and government-regulated rate structures. The company has paid dividends annually for 50 years while growing its payout at a 6% annual rate since 2018.
The company generates enough cash to cover its high-yielding dividend by more than 2 times. That allows it to retain some money to fund expansion projects and make accretive acquisitions. It also has a strong balance sheet to fund new growth investments.
Williams currently has a large backlog of organic expansion projects under construction, which should come online through 2027, and several more under development. That visible backlog drives its view that its earnings will grow by 5% to 7% annually over the long term, which should give it plenty of fuel to continue increasing its dividend.
These high-yielding payouts should keep rising
Brookfield Renewable, Kenvue, Mid-America Apartment Communities, and Williams all offer dividends yielding more than 4% these days. They also have excellent records of increasing their dividends, which will likely continue in the coming years. Because of that, they look like great income stocks to grab before the Federal Reserve starts cutting rates.
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Matt DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners, Johnson & Johnson, Kenvue, and Mid-America Apartment Communities and has the following options: short August 2024 $20 puts on Kenvue. The Motley Fool has positions in and recommends Brookfield Renewable, Kenvue, and Mid-America Apartment Communities. The Motley Fool recommends Brookfield Renewable Partners and Johnson & Johnson and recommends the following options: long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.
