Explore two Profitable Dividend Shares to Increase Your Holdings Immediately
Last year, numerous high-yield dividend stocks suffered underperformance compared to the market. The primary cause for this slump was the rise in interest rates. With higher interest rates, safer income investments such as bank CDs and government bonds become more desirable, thereby decreasing the value of higher-risk income investments, like high-yield dividend stocks.
The bullish side of the situation? Investors can now lock in lucrative yields on top-tier dividend stocks. Two such stocks that present excellent opportunities for expansion without overextending your portfolio are Brookfield Renewable and Realty Income.
Brookfield Renewable: Time to Maximize Returns
Shares of Brookfield Renewable have taken a hit, counterintuitively dropping over 10% in the past year. This unfortunate circumstance has increased the renewable energy company's dividend yield above 5.5% – which is significantly higher than the 1.2% S&P 500 dividend yield, which is currently at a 20-year low.
Despite the stock's decline, Brookfield Renewable had a prosperous year. Its funds from operations (FFO) rose 11% during the third quarter, placing it on track for another year of double-digit FFO growth. Recently completed development projects, acquisitions, and climbing power prices have contributed to its success.
Brookfield Renewable anticipates more significant growth moving forward. The waters are favorable for renewable energy, with an acceleration in corporate demand for clean energy, driven by global technological players. This growing demand has also enabled Brookfield to develop more projects, with objectives to complete 7 gigawatts of capacity by the end of this year, and 9.1 gigawatts by 2026.
Additionally, Brookfield Renewable will continue to benefit from accretive acquisitions and inflation-linked increases in existing contracts. As legacy contracts expire and new ones with increased market rates are established, the company's growth prospects remain promising, allowing it to maintain or even boost its FFO per share annually.
This favorable trajectory bolsters the prediction that Brookfield Renewable can increase its FFO per share by over 10% annually for the foreseeable future. In turn, the plan to grow its dividend at a 5% to 9% annual rate appears attainable given the company's proven track record of delivering a compound annual growth rate of 6% in dividends since 2001.
Realty Income: Another Opportunity to Boost Returns
Shares of Realty Income slipped by about 7% in the past year, leading to a near 6% dividend yield. Despite these declines, the real estate investment trust (REIT) had another robust year. Its adjusted FFO per share is projected to increase by approximately 5%, in line with its traditional average.
Realty Income also unveiled a novel strategy, aiming to tap into the extensive private capital market. This approach will provide management fee income, further enhancing its investment returns. This new strategy positions Realty Income to secure additional accretive acquisitions without relying on external capital, such as stock sales or new debt.
Realty Income's steady FFO growth has allowed it to maintain a consistent track record of dividend increases. In 2023, it announced its 128th consecutive annual dividend increase since its IPO in 1994. The REIT has well-established itself as a reliable performer, having raised its dividend for 30 consecutive years and increasing its quarterly payment for 109 consecutive quarters.
The enormous commercial real estate market presents a trillion-dollar opportunity for companies like Realty Income. Its new funding strategy and focus on accretive acquisitions set it up to continue steadily raising its dividend as the market evolves.
Investing in Your Income Stream
Brookfield Renewable and Realty Income struggled last year due to the impact of higher interest rates on high-yield dividend stocks. These temporary price declines offer investors an opportunity to secure more lucrative income streams. Beyond these compelling dividends, the promise of future growth potential is an added bonus.
These stocks present not only a secure source of income but also a plausible scenario for significant growth in the years to come, as interest rates fall and income and dividend rates increase, driving up stock prices. It's a win-win situation for discriminating investors looking to capitalize on opportunities in the current market landscape.
In the current financial climate, investors can capitalize on the reduced prices of high-yield dividend stocks like Brookfield Renewable and Realty Income, which have suffered underperformance due to rising interest rates. With these stocks, investors can not only secure lucrative income streams but also anticipate potential growth as interest rates decrease and dividend rates increase, resulting in an upward trend in stock prices. Moreover, companies like Brookfield Renewable and Realty Income have demonstrated resilience, with strong financial performance and consistent dividend increases, making them attractive investment options in the field of finance.