Investors looking to generate a growing income stream may want to consider investing in stocks of leading dividend-paying companies. Numerous firms have a track record of consistently distributing and increasing their dividends for decades. This makes them a compelling choice for passive income investors.
However, investors must exercise caution when selecting dividend stocks. It is essential to invest in companies that have a solid earnings base and a remarkable history of dividend payment and growth.
Among the notable contenders, Enbridge (ENB), EOG Resources (EOG), and Emerson Electric Company (EMR) stand out for steady income growth. These companies have consistently grown their dividends and enhanced shareholders’ returns in all market conditions. Let's take a closer look at why these stocks are excellent choices for individuals seeking steady income growth.
Enbridge
Enbridge is a top energy infrastructure company in North America. It is engaged in the transportation and export of crude oil (CLX23) and other liquid hydrocarbons. In addition, Enbridge owns a Gas Distribution and Storage business and possesses renewable power generation assets across North America and Europe.
This energy company has generated low-risk and resilient cash flows across many commodity and economic cycles. This has supported its dividend distributions. It’s worth noting that Enbridge has been paying dividends for close to seven decades. Moreover, in the last 28 years, its dividend increased at a CAGR of 10%, which is impressive. Currently, ENB offers a lucrative yield of about 8%.
Enbridge’s diversified portfolio of conventional and lower-carbon platforms (renewables and hydrogen), project development opportunities, and ongoing efficiency improvement to increase profitability all leave the company well-positioned to drive mid-single digit growth in the future distributable cash flow per share. This would enable the company to sustainably grow its dividend by at least a low to mid-single-digit rate.
Out of the 15 analysts covering ENB, five have a “strong buy” recommendation, three recommend “moderate buy,” and seven analysts suggest a “hold.” The average price target for Enbridge stock is $42.75, which implies 32% growth potential from current levels.
EOG Resources
EOG Resources engages in the exploration, production, and marketing of crude oil, natural gas liquids (NGLs), and natural gas (NGX23). What stands out is its ability to uninterruptedly pay and grow dividends, regardless of economic or commodity cycles. Moreover, the company is committed to return at least 60% of its annual free cash flows to shareholders via dividends or share repurchases. All of these positives make EOG Resources an attractive play to start growing a passive income stream.
It’s worth highlighting that EOG Resources has never suspended or reduced its dividend payments. Moreover, its dividend has grown at a CAGR of a solid 22% in the past 25 years. Its stellar payouts are supported by a low-cost operating structure, a high-quality resource base spanning multiple basins, and a strong balance sheet.
Shares of EOG Resources offer a decent yield of 4.27%. Looking ahead, its growing portfolio of low-cost and high-return resources and operational efficiencies will enable the company to generate robust free cash flows and drive higher dividend payments.
Of 21 analysts covering EOG, 17 have a “strong buy” recommendation, and four suggest a "hold.” The average price target for EOG is $147.78, which implies nearly 10% upside potential from current levels.
Emerson Electric
Emerson Electric stock boasts an impressive 66-year track record of consistent dividend growth, making it an enticing choice for income investors. The company manufactures products and offers engineering services across diverse sectors, encompassing industrial, commercial, and consumer markets.
EMR offers a reliable dividend yield of 2.22%, backed by its growing earnings from continuing operations. Furthermore, its continued operational execution, strong sales growth, and operating leverage support its payouts.
Looking ahead, the resilient end market demand and improving supply chain environment bode well for growth. Furthermore, the company's expanding order book and multi-billion dollar backlogs indicate a promising trajectory for steady growth. Additionally, Emerson's strategic focus on optimizing its portfolio through divestitures and acquisitions position the company well to seize opportunities with higher returns.
Out of the 20 analysts covering EMR, 13 have a “strong buy” recommendation, two analysts recommend a “moderate buy,” and five analysts suggest a "hold.” The average price target for Emerson Electric is $108.31, which implies about 14% upside potential from current levels.
