This year has been a challenging one for dividend investors. More than 175 public companies reduced their dividends by at least 50%, with many suspending them entirely because of the impact the COVID-19 outbreak has had on their financial situation. That's leaving income-focused investors with fewer options.
However, not alldividend stocksare in trouble. Several still offer investors attractive yields that appear sustainable over the long-term. Here are five top options that offer payouts above 5%.
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Brookfield Infrastructure: Current yield 5%
Global infrastructure operatorBrookfield Infrastructure(BIP -0.92%) (BIPC -1.67%) has been a dynamic dividend stock over the years. It has increased its payout at least once each year -- growing it at an 11% compound annual rate overall -- since it burst on the scene more than a decade ago. It expects that trend to continue, aiming to grow it by 5% to 9% per year. Supporting that view is its contractually secured cash flows, conservative payout ratio (63% in the first quarter), stronginvestment-gradebalance sheet, and visible growth from expansion projects and acquisitions.
TC Energy: Current yield 5.5%
Canadian pipeline giantTC Energy(TRP 0.99%) also has a long history of growing its high-yielding dividend. This year marked the 20 consecutive one that the company had given its investors a raise. Overall, it has grown its payout at a 7% compound annual rate during that time. That trend also appears likely to continue since TC Energy boasts contractually secure cash flow, a low payout ratio (40%), one of the strongest credit ratings in the pipeline sector, and among the biggest expansion backlogs in the space. Those factors lead it to project an 8% to 10% dividend increase for 2021 and 5%-7% annual growth after that.
Atlantica Yield: Current yield 6.2%
Sustainable infrastructure companyAtlantica Yield(AY -1.03%) has a bit of a spotty dividend track record. The company did run into some trouble in 2015, forcing it to pause and then reset its payout at a lower rate. However, it has since resumed dividend growth and has increased it in several quarters. While Atlantica currently has a higher payout ratio of around 85% of its cash flow, that should come down as itcompletes several expansion-related investments that grow earnings. That growth, when combined with Atlantica's steady contract-backed cash flow and solid balance sheet, puts its payout on a sustainable foundation.
PPL: Current yield 6.5%
UtilityPPL(PPL 0.26%) has been a consistent dividend stock over the years. It has paid its investors every quarter since 1946, including increasing its payout in 18 of the past 19 years. The company currently distributes about 66% of its earnings, which is right around the average for a utility stock. It also generates stable cash flow thanks to its regulated utility businesses and has a solid investment-grade balance sheet. PPL has the financial flexibility to invest $14 billion to expand its operations over the next five years, which should enable it to continue growing its payout in the years to come.
Williams Companies: Current yield 8.2%
Natural gas pipeline giantWilliams Companies(WMB 1.64%) has had some hits and misses with its dividend over the years. While it has paid a dividend every quarter since 1974, the company had to reset it during the major energy market downturn of 2014 to shore up its financial profile. It has since increased its dividend several times from that reduced level, including by 5.3% over the past year. The current payout is on a much more sustainable foundation since it only consumes about 65% of the company's contractually secured cash flow. That low payout ratio enables it to retain most of the cash needed to finance its current slate of expansion projects. Add that to its much-improved balance sheet, and Williams is in a position to deliver sustainable dividend growth of 5%-7% per year for the foreseeable future.
High yields without the accompanying risk
Dividends have been one of the many casualties of the COVID-19 outbreak. However, these five above-average payers have managed to maintain their payouts during the downturn because they all generate a stable income stream, have solid balance sheets, and reasonably conservative payout ratios. When combined with their growth-focused investments, those factors should enable these high-yielding stocks to continue growing their payouts in the future. That makes them ideal options for investors focused on generating income.
Matthew DiLallo owns shares of Atlantica Yield, Brookfield Infrastructure, and Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure and Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.
