Generating passive income can help get you on the road to financial freedom. It can help offset some of your expenses, reducing the time you need to actively work to fund your lifestyle. The more passive income you can produce, the less reliant you’ll become on your career for income.
Buying stocks that pay dividends is a great way to start earning durable passive income. Two great dividend stocks to buy for income right now are Brookfield Renewable (BEPC -2.65%) (BEP -1.29%) and Enbridge (ENB 1.09%). They pay high-yielding dividends that should continue growing in the decades ahead.
A powerful passive income stream
Brookfield Renewable has paid a very dependable dividend over the past couple of decades. The leading global renewable energy producer has grown its payout at a 6% compound annual rate since 2001. It raised its payment by at least 5% each year since 2011.
The company currently pays a dividend yielding more than 5.6%. That’s several times higher than the S&P 500‘s dividend yield of 1.2%. At that rate, every $100 invested into Brookfield Renewable’s stock would produce $5.60 of annual dividend income each year. That compares with only about $1.20 of dividend income from a similar investment in an S&P 500 index fund.
Brookfield Renewable aims to increase its dividend at a 5% to 9% annual rate over the long term. It should have plenty of power to achieve that target. The company has several growth drivers, including inflation-linked rate increases, rising power prices, development projects, and acquisitions. Those catalysts drive the company’s view that it can grow its funds from operations (FFO) per share at a more than 10% annual rate over the next decade.
Development projects are a major growth driver for Brookfield Renewable. It currently has a massive 200 gigawatts (GW) of projects under development, compared with its 37 GW operating portfolio. And it has about 65 GW of projects in its advanced stage pipeline that it should complete by 2030. Development projects will grow its FFO per share by about 4% to 6% annually over the next several years. With renewable energy demand only expected to keep growing, Brookfield should be able to continue expanding for decades to come.
An income-producing machine
Enbridge has been an extremely reliable dividend stock. The Canadian pipeline and utility company has paid dividends to its investors for about 70 years and has raised its payout annually for the past 30 in a row. Its dividend currently yields more than 6%.
The company generates very stable cash flow to support its high-yielding dividend. Roughly 98% of its earnings come from cost-of-service agreements or long-term contracts. Those agreements give Enbridge a lot of visibility into its earnings. That’s evident by the fact that it was well on its way to delivering its 19th straight year of achieving its annual financial guidance in 2024.
Enbridge also has a lot of visibility into its future growth prospects. The company had about $27 billion Canadian ($18.7 billion) of secured capital projects in its backlog toward the end of last year. Those projects included additional oil terminal expansions, natural gas pipeline projects, gas utility growth projects, and renewable energy projects. It had expansions on track to come online through 2029. Meanwhile, it had several more under development, including many potential projects to support the growth of lower-carbon energy.
The company’s massive backlog of secured capital projects helps support its long-term growth outlook. Enbridge expects to grow its cash flow per share at around a 3% annual rate through 2026 and about 5% per year after that. This forecast should support dividend growth in the low to mid-single digits over the coming years.
The durability seems likely to continue
Brookfield Renewable and Enbridge have already delivered decades of dividend growth. They’re well positioned to continue increasing their high-yielding payouts in the decades to come. That makes them excellent dividend stocks to buy right now for those seeking durable passive income streams.
Matt DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners, and Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
