There are numerous advantages to dividend securities. Their proprietors are provided with passive income by these entities. Additionally, they have historically generated total returns that have surpassed the market.
Those investors who favor dividends are typically seeking to supplement their portfolios with an additional income generator. Southern Company (NYSE: SO), Brookfield Asset Management (NYSE: BAM), and Darden Restaurants (NYSE: DRI) are three top-notch dividend stocks that income seekers should love because they offer higher-yielding payouts that should grow in the future. They appear to be excellent income securities to purchase and hold over the long term as a result.
Increasing power to expand its dividend
Southern Company presently provides a dividend yielding at 4%. That is more than double the dividend yield of the S&P 500, which has been hovering around 1.5% recently.
Since 1975, the utility has consistently distributed dividends that are equal to or higher than the amount paid in the previous quarter. Further, the dividend was increased for the twentieth consecutive year in 2023.
Additionally, Southern Company possesses ample resources to sustain its dividend growth. More than ten billion dollars have been invested by the organization in the construction of two additional nuclear power-generating units (Vogtle 3 and 4). Unit four is anticipated to commence commercial operations early the following year, whereas the third unit commenced service earlier this year.
Southern Company estimates these plants will produce $700 million in annual operating cash flow. That will give it more money to invest in expanding its utility business (including building out its Southern Power renewable energy platform) and increasing its dividend.
Rapid expansion ahead
Brookfield Asset Management currently pays a 3.2%-yielding dividend. Prominent international alternative asset manager ambitiously aims to expand its dividend policy.
The company expects to grow fee-related earnings by 15% to 20% annually over the next several years. It plans to pay out 90%+ of those recurring earnings in dividends, implying it should increase its dividend at a similar rate.
Brookfield aims to grow its fee-bearing capital base to more than $1 trillion by 2028, more than double its $440 million of fee-bearing assets under management (AUM) at the end of the third quarter. That should more than double its fee-related earnings by 2028 (growing them from $2.2 billion to $4.8 billion).
Brookfield’s ability to raise bigger flagship funds and launch new funds drives that growth outlook. For example, it recently raised a record $30 billion for its latest flagship infrastructure fund (Brookfield Infrastructure Fund V). That was 40% larger than the prior fund (BIF IV) and exceeded its $25 billion target.
Brookfield also recently launched its first Catalytic Transition Fund (targeting sustainable investments in emerging and development markets) and its second Global Transition Fund. These and other new funds will grow Brookfield’s fee-related earnings, enabling it to rapidly increase its dividend.
A tasty dividend
Darden Restaurants currently offers a 3.2% dividend yield. The restaurant operator has steadily increased its dividend over the years. While the company cut it in 2020 due to the pandemic’s impact on its operations, it brought the payment back to its pre-pandemic level in 2021 and has grown its rate over the past few years. The company gave its investors an 8% raise earlier this year.
The restaurant operator should continue growing its dividend in the future. It’s continuing to expand its restaurant count and same-store sales, giving it more cash to pay dividends, and plans to open 50 new restaurants in fiscal 2024 while growing same-store sales by 2.5% to 3.5%.
In addition to organic growth, Darden recently acquired Ruth’s Hospitality Group in a $715 million deal. The transaction added 154 Ruth’s Chris locations. The company expects the deal will boost its earnings per share in fiscal 2024 while adding another concept to its growing menu of restaurants, positioning it for more organic growth.
Attractive and rising income streams
Southern Company, Brookfield Asset Management, and Darden Restaurants offer dividend yields that are more than double the rate of the S&P 500. On top of that, these companies should increase those payouts in the future. That makes them great options for investors who like dividends since these companies should supply a growing income stream with the potential to produce market-beating total returns.
Should you invest $1,000 in Southern Company right now?
Before you buy stock in Southern Company, 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 Southern Company wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
