It’s hard to believe 2022 is already drawing to a close. However, with the calendar recently flipping to the December page, it’s time to start making year-end investment plans.
This month is a great time to buy dividend-paying stocks to boost your passive income in the coming year. Three higher-yielding dividend stocks some of our Fool.com contributors think are great ones to buy before the year ends are TotalEnergies (TTE -0.09%), Enbridge (ENB -0.85%), and Brookfield Renewable (BEP 1.08%) (BEPC 0.80%).
Built to handle oil volatility
Reuben Gregg Brewer (TotalEnergies): Oil prices have been a wild ride of late, with supply/demand concerns, geopolitical conflicts, and OPEC pronouncements all impacting investor sentiment. Companies that produce oil have gone along for the ride, including France’s TotalEnergies, which has seen multiple 20 percentage point moves (up and down) over the past year. But, if you are looking to add an energy name to your portfolio, this 4.5% yielding energy major should be on your short list.
As an integrated oil company, TotalEnergies has exposure to virtually all aspects of the sector. Since some areas tend to benefit from falling oil prices, notably in the downstream arena which uses oil to produce chemicals and refined products, financial results tend to be smoother than they would be for pure drillers. TotalEnergies has also been hedging its business against the shift toward renewable power by investing aggressively in clean energy. That provides even more balance to the portfolio but also gives investors a hedge against the risk of oil becoming obsolete.
Meanwhile, the company’s recent strong results have positioned it well. For starters, the company expects to have zero net debt in short order, which basically means it has enough cash to pay off all of its debt — if it wanted to do so. As for rewarding investors, it hiked the dividend 5% this year and paid a one-time special dividend (U.S. investors have to pay foreign taxes on the dividends).
If you’re looking to put some money to work before the end of the year, TotalEnergies is a well-positioned, high-yield energy name worth considering.
The streak continues
Matt DiLallo (Enbridge): Enbridge is a great income stock to buy heading into the new year. The Canadian pipeline and utility company recently revealed plans to increase its dividend by another 3.2% for 2023. That will mark the 28th consecutive year of increasing its payout. With its latest raise, the company’s dividend yields 6.5%.
That big-time payout will likely continue rising in the future. Enbridge’s low-risk business model generates lots of steady cash flow. Meanwhile, it pays out a conservative portion of that money via the dividend — about 65% in 2023 (the mid-point of its 60% to 70% target range) — enabling it to retain lots of cash to help fund expansion projects. Add a top-notch balance sheet with leverage at the low end of its target range, and Enbridge has ample financial flexibility to fund its continued expansion.
The company has already lined up a multibillion-dollar backlog of commercially secured expansion projects. They include new natural gas pipelines, offshore wind farms in Europe, and natural gas utility expansions. Those projects have it on track to grow its cash flow per share at a 5% to 7% annual rate through at least 2024. Meanwhile, it has secured several projects to drive post-2024 growth and has more in the pipeline.
Enbridge offers a rock-solid, high-yielding payout with visible growth on the horizon. Those features make it an attractive investment heading into the new year, especially given all the current economic uncertainties.
Dividends you can bank on
Neha Chamaria (Brookfield Renewable): By 2050, trillions of dollars are expected to be pumped into the clean energy industry as decarbonization gathers pace globally. There’s one company that could hugely benefit from this energy transition. This company, in fact, made record investments in growth this year, setting itself up for steady cash flow and dividend growth. Yet its share price has fallen steadily in recent months on macroeconomic fears. The combination of a strong business and an attractive stock price makes now a great opportunity to buy shares in Brookfield Renewable, currently yielding above 4%.
Brookfield Renewable is a no-brainer for income investors. The company is a large player in an industry with solid growth potential, currently managing assets worth nearly $68 billion across hydropower, wind, solar, and distributed generation. Since most of Brookfield Renewable’s cash flows are contracted, it can generate funds from operations (FFO) and steady cash flows, pay regular dividends, and even grow them over time as its growth investments boost cash flows.
So far, Brookfield Renewable has increased its annual dividend per share every year since 2013, growing it at a compound annual rate of 6% over the period. That dividend growth, backed by earnings and cash-flow growth, has rewarded shareholders richly over the years.
Brookfield Renewable is targeting a 5% to 9% hike in dividend per share every year for the long term. It could easily hit that goal given that the company already has more than 100 gigawatts (GW) of capacity under development, or more than four times its existing capacity under operation. That’s huge and could just be the beginning of Brookfield Renewable’s growth story. With the stock falling sharply in the last few months, here’s your chance to buy a solid dividend stock before 2022 ends.
Matthew DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners, and Enbridge. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has positions in Enbridge and TotalEnergies Se. The Motley Fool has positions in and recommends Brookfield Renewable and Enbridge. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.