2 stocks to buy with dividends yielding more than 3%

Dividend stocks can be great investments. Companies that pay dividends have historically outperformed S&P500, as these payments are added to the stock’s total return. Although a higher dividend yield helped, the best returns came from companies that consistently increased their dividends.

Some companies offer the best of both worlds. They pay a high dividend yield and offer attractive growth. Of them dividend stocks who expect to provide a fast-growing, high-return stream of income are International Crown Castle (NYSE: CCI) and NextEra Energy Partners (NYSE:NEP). Both are currently producing over 3%, more than double the average stock in the S&P500.

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Connected to a decade-long growth cycle

Crown Castle is a real estate investment trust (REITs) focused on communications infrastructure such as cell towers, small cells, and fiber optic cables. the Infrastructure REITs leases these assets to mobile operators under long-term contracts, generating stable cash flows. This gives it the funds to cover its 3.2% dividend.

The company sees many opportunities to continue investing in building and acquiring communications infrastructure. The main driver is the industry’s faster deployment of 5G networks. Cellular carriers need more infrastructure to support this network, leading them to lease additional cell towers and small cells.

For example, T-Mobile (NASDAQ:TMUS) recently signed a new 12-year agreement with Crown Castle to support the continued build-out of its 5G network. T-Mobile’s deal will help grow revenue from Crown Castle’s tower and small cells as the company leases additional capacity.

Overall, Crown Castle foresees a multi-decade investment cycle as customers develop next-generation wireless networks like 5G. This confirms the REIT’s view that it can increase its dividend at an annual rate of 7% to 8% over the next few years. It might even be conservative. It has increased its payout above the high end of this rate over the past two years due to better-than-expected demand for communications infrastructure.

Combined with its high-yielding dividend, this strong rate of growth allows Crown Castle to potentially produce double-digit total annual returns in the years to come.

Strong future dividend growth

NextEra Energy Partners is a clean energy infrastructure company that operates renewable energy-production facilities and natural gas pipelines. These assets generate stable cash flows guaranteed by long-term fixed rate contracts. This helps support NextEra Energy Partners’ dividend, which yields 3.6%.

The company expects strong growth for this dividend. It currently plans to increase this payment by an annual rate of 12-15% until at least 2024. It has several growth drivers, including acquiring clean energy infrastructure from third parties, investing in organic expansion projects and buying assets developed by its parent company, utility NextEra Energy (NYSE:NEE).

NextEra Energy Partners’ relationship with NextEra alone could enable it to achieve its dividend growth objective. The utility has one of the largest renewable energy portfolios in the world and an equally large pipeline of development opportunities, so there is no shortage of assets it can entrust to the partnership. These agreements would help fund additional development opportunities.

The two companies unveiled their latest transaction at the end of October. NextEra Energy Partners is buying a 50% stake in a large-scale portfolio of renewable energy assets, including integrated storage batteries. She funded the deal with the help of a private equity fund, which provided her with convertible equity portfolio financing. This low-cost financing structure allows NextEra Energy Partners to choose when it issues shares, improving its ability to increase the dividend.

Combine the company’s double-digit dividend growth with its high yield, and NextEra Energy Partners could deliver mid- to upper-teens total returns over the next few years.

Excellent long-term dividend stocks

Dividend yields of over 3% from Crown Castle and NextEra Energy Partners are only part of their appeal. Both companies plan to increase their attractive payouts at above-average rates over the next few years. This means that they could produce total returns above the market in the years to come. This rising income makes them look like great dividend-paying stocks to buy these days.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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