Hundreds of companies slashed or suspended their dividends this year in the wake of the COVID-19 outbreak. That made 2020 the worst year for dividend investors since the 2008-2009 financial crisis.
However, while this year has been a tough one for dividend durability, many payouts have proved their resiliency, and stand a good chance of surviving future crises. Three of those standouts are renewable energy producer Brookfield Renewable (BEP -1.03%) (BEPC -0.51%), apartment-focused REIT Camden Property Trust (CPT 2.46%), and utility NextEra Energy (NEE 2.77%). Their stability amid this year's storm makes them seem likely to provide their investors with a lifetime of dividend income.
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A sustainable income stream
Brookfield Renewable currently offers a well-above-average dividend yield of 3.8%. That payout is built on a very sustainable foundation composed of several factors; these include the stability of Brookfield's cash flow, its top-tier balance sheet, and a reasonably conservative dividend payout ratio. Overall, long-term fixed-rate contracts back 95% of the company's cash flow, which helps insulate it from economic volatility. Meanwhile, it has the highest-rated credit in the renewable-energy sector, and a solid 70% dividend payout ratio.
Therefore the company has the financial flexibility to continue expanding its renewable-energy operations. In its view, those investments will power annual cash flow growth of 9% to 16% for at least the next five years. That forecast easily supports Brookfield's plan to increase its dividend at 5% to 9% annually. With cash flow growing faster than that payout, it will be on an even more sustainable footing in the future, increasing the likelihood that Brookfield delivers a lifetime of dividends to its investors.
The "lazy landlord" option
Camden Property Trust also pays a dividend yielding 3.8%, which is likewise on rock-solid ground because the REIT has a strong financial profile. That includes benefiting from the relatively stable cash flow backed by apartment rent payments, a top-tier balance sheet that features one of the highest credit ratings in the REIT sector, and a conservative dividend payout ratio. Those factors make it one of the safest REITs these days.
Meanwhile, Camden's strong financial profile gives it the flexibility to continue expanding its portfolio. The company has a long history of making accretive acquisitions and investing in high-return development and redevelopment projects. Combined with its top-notch apartment portfolio's embedded rent growth, those future investments should provide Camden with a steadily growing stream of rental income to support its dividend. The company offers investors the opportunity to benefit from the passive income generated by apartment buildings, with none of the hassles of being a landlord.
Generating a steadily growing dividend
NextEra's dividend, at 2%, currently yields slightly more than the market's average. However, what this payout lacks in size, it more than makes up for with its growth prospects. The company currently expects to increase its dividend at about 10% annually through at least 2022. Meanwhile, it should have plenty of power to keep growing, since it recently boosted its earnings-growth forecast for 2021 and 2022 and extended its outlook into 2023, thanks in large part to its investments in renewable energy.
The company has the financial strength to back that forecast. It boasts both one of the highest credit ratings in the utility sector, and one of the lowest dividend payout ratios (60% vs. the peer-group average of 65%), giving it lots of financial flexibility to fund expansion projects. Combine that with the durable cash flow of its Florida utilities and the contractual backing of its renewable-energy projects, and NextEra's dividend is one of the few in the energy sector built to endure the decades ahead.
Potentially lifelong income streams
Dividends aren't as durable as they once were, as many companies now cut them at the first sign of trouble. Thus, if you're looking for long-term income streams, you need to find payouts that can endure turbulent times.
That's why you should consider Brookfield Renewable, Camden Property, and NextEra Energy. Not only did their dividends withstand this year's turbulence, but the three companies also have the financial fortitude to make it through future crises. That increases the probability that these payouts can last a lifetime.
Matthew DiLallo owns shares of Brookfield Renewable Inc., Brookfield Renewable Partners L.P., and NextEra Energy. The Motley Fool recommends NextEra Energy. The Motley Fool has a disclosure policy.
