The dividend yield on the S&P 500 recently hit its lowest point in 20 years at less than 1.2%. That’s well below its peak of more than 4% following the financial crisis. The S&P 500’s low yield is due to surging stock prices, which push down a stock’s yield. Many companies have also deemphasized paying dividends in more recent years.
However, while the average stock has a low yield, several companies offer much higher dividend yields. Brookfield Infrastructure (BIPC -1.24%) (BIP -0.12%), Rexford Industrial Realty (REXR 0.58%), and Mid-America Apartment Communities (MAA -0.25%) currently have dividend yields above 3%, making them great dividend stocks to buy right now.
Robust growth ahead
Brookfield Infrastructure currently yields 3.9%. The global infrastructure operator has done a tremendous job of paying dividends over the years. It has increased its payout every year since its formation a decade and a half ago, growing the payout at a 9% compound annual rate.
The company expects to increase its high-yielding payout by 5% to 9% annually. Several factors support that outlook. It has a strong investment-grade balance sheet, a reasonable dividend payout ratio (60% to 70% of its funds from operations, FFO), and produces very stable cash flow (90% is contracted or regulated).
Brookfield Infrastructure also has a lot of visible growth ahead. It expects a combination of inflation-linked rate increases, volume growth as the global economy expands, and expansion projects to grow its FFO per share at a 6% to 9% annual rate. Meanwhile, the company expects accretive acquisitions funded through capital recycling to drive its FFO per-share growth rate above 10% annually. The company’s current investment pipeline is as big as it has been in recent years and continues to grow, giving it lots of fuel to increase its FFO and dividend.
Ample built-in growth with upside potential
Rexford Industrial Realty also currently yields 3.9%. The industrial real estate investment trust (REIT) has grown its dividend at an impressive 15% compound annual rate since its initial public offering (IPO) in 2013. Meanwhile, dividend growth over the last five years has averaged 18% annually, well above its peer average of 11%.
The industrial REIT has lots of built-in growth ahead. It sees a combination of repositioning and redevelopment projects, rent growth (embedded in existing leases and capturing higher market rents as legacy leases expire), and recently secured acquisitions to add $222 million in incremental net-operating income over the next three years. That implies 34% growth from its current annualized level by the third quarter of 2027.
Rexford’s outlook doesn’t include the potential impact from additional acquisitions outside of those it recently secured. It has about $200 million of investments in its near-term acquisition pipeline. Meanwhile, it has a strong balance sheet, giving it plenty of financial flexibility to continue making accretive acquisitions in the coming years. With ample built-in growth and additional upside potential, Rexford should have no trouble continuing to grow its dividend briskly.
Accelerating into the new upcycle
Mid-America Apartment Communities (MAA) currently yields 3.8%. The apartment REIT has increased its high-yielding payout for 14 straight years, including by 5% late last year.
The landlord is currently facing some headwinds from a flood of new apartment supply across its markets, which has weighed on rent growth. However, the company expects a meaningful drop in new apartment supply next year. That drives its view that “we will enter a new multi-year cycle with demand outpacing supply,” commented CEO Eric Bolton in the Q3 earnings press release.
While other developers have pulled back on new investments due to higher interest rates, MAA is starting to hit the accelerator. The company currently has eight projects under development that it expects to complete by 2027. In addition, it recently agreed to finance a third-party development project, which it can acquire upon completion. It also recently bought a couple of newly completed new apartment communities. MAA has ample financial flexibility to start new developments and make additional acquisitions. These new additions to its portfolio will complement rising rents, which should enable the REIT to continue increasing its high-yielding dividend.
Attractive income and growth potential
Brookfield Infrastructure, Rexford Industrial Realty, and MAA all currently offer dividend yields well above 3%, which is high in the current environment. On top of that, they all have healthy growth profiles, which suggests they should be able to continue increasing their dividends. That combination of income and growth makes them great dividend stocks to buy right now.
Matt DiLallo has positions in Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, Mid-America Apartment Communities, and Rexford Industrial Realty. The Motley Fool has positions in and recommends Mid-America Apartment Communities. The Motley Fool recommends Brookfield Infrastructure Partners and Rexford Industrial Realty. The Motley Fool has a disclosure policy.
