Many businesses distribute dividends, yet not all dividend stocks are ideal for income-focused investors. The best options stand out due to the resilience of their cash flows and robust financial health, allowing them to offer appealing and consistently growing dividends even during tough times.
NextEra Energy (NEE 1.51%) and Realty Income (O -0.47%) exemplify such stocks. They have successfully increased their dividends for 30 consecutive years, even through three significant economic downturns. This trend is expected to continue, making them excellent income stock choices for investors this May.
Consistent Dividend Growth
NextEra Energy has excelled in dividend growth over the years, raising its payout for over 30 years and achieving a remarkable 10% compound annual growth rate in dividends over the past 20 years. This pace outstrips both the average utility and the S&P 500 (^GSPC 1.47%).
The company’s strong dividend growth can be attributed to its stable business model, which includes a Florida-based electric utility and a power generation segment. These operations generate predictable earnings secured by government-regulated rate structures and long-term contracts, offering reliable cash flow for dividends (current yield of nearly 3.5%, compared to less than 1.5% for the S&P 500) and business expansion. NextEra’s strong balance sheet also provides financial agility.
Secured for Continuous Dividend Payments
Realty Income boasts an impressive history of dividend increases, having raised its payout 130 times since going public in 1994. Notably, it maintains 110 consecutive quarters of dividend growth over 30 years, with an annual growth rate of 4.3% over that period.
The REIT derives stable rental income from a diversified property portfolio (including retail and industrial sectors) across the U.S. and Europe, secured by long-term net leases, which ensure consistent cash flow as tenants handle operating expenses. Realty Income leases to many prominent companies like 7-Eleven, Home Depot, and Walmart and focuses on sectors that are resilient against e-commerce pressures (representing 91% of its annual base rent).
Reliable Income Stocks
Both NextEra Energy and Realty Income provide dividends that investors can confidently rely on. Their steady cash flows allow them to maintain lucrative dividends while investing in growth opportunities. With solid business structures and strong financial positions, these companies are well-positioned to continue raising their dividend payouts in the future. Thus, investors seeking income can consider them worthwhile investments this month.
Matt DiLallo holds positions in Home Depot, NextEra Energy, and Realty Income. The Motley Fool recommends and has positions in Home Depot, NextEra Energy, Realty Income, and Walmart. The Motley Fool has a disclosure policy.
