a money bag on a pile of cash

There’s a lot to like about dividend stocks. They supply their owners with passive income. On top of that, they’ve historically delivered market-beating total returns.

Investors who like dividends are usually on the lookout for another income producer to add to their portfolios. Southern Company (NYSE: SO), Brookfield Asset Management (NYSE: BAM), and Darden Restaurants (NYSE: DRI) are three top-notch dividend stocks that income seekers should love because they offer higher-yielding payouts that should grow in the future. That makes them seem like great income stocks to buy and hold for the long haul.

Adding more power to grow its dividend

Southern Company currently offers a 4%-yielding dividend. That’s more than twice the S&P 500‘s dividend yield (recently around 1.5%).

The utility has a long history of paying dividends and has paid one equal to or greater than the prior-quarter’s level for 75 years. Meanwhile, 2023 marked the 22nd consecutive year it has increased its dividend.

Southern Company has plenty of power to continue growing its dividend, too. The company has invested over $10 billion to build two new nuclear power-generating units (Vogtle 3 and 4). The third unit entered service earlier this year, while unit four should begin commercial operations early next year.

Southern Company estimates these plants will produce $700 million in annual operating cash flow. That will give it more money to invest in expanding its utility business (including building out its Southern Power renewable energy platform) and increasing its dividend.

Rapid growth ahead

Brookfield Asset Management currently pays a 3.2%-yielding dividend. The leading global alternative asset manager has big plans to grow its payout.

The company expects to grow fee-related earnings by 15% to 20% annually over the next several years. It plans to pay out 90%+ of those recurring earnings in dividends, implying it should increase its dividend at a similar rate.

Brookfield aims to grow its fee-bearing capital base to more than $1 trillion by 2028, more than double its $440 million of fee-bearing assets under management (AUM) at the end of the third quarter. That should more than double its fee-related earnings by 2028 (growing them from $2.2 billion to $4.8 billion).

Brookfield’s ability to raise bigger flagship funds and launch new funds drives that growth outlook. For example, it recently raised a record $30 billion for its latest flagship infrastructure fund (Brookfield Infrastructure Fund V). That was 40% larger than the prior fund (BIF IV) and exceeded its $25 billion target.

Brookfield also recently launched its first Catalytic Transition Fund (targeting sustainable investments in emerging and development markets) and its second Global Transition Fund. These and other new funds will grow Brookfield’s fee-related earnings, enabling it to rapidly increase its dividend.

A tasty dividend

Darden Restaurants currently offers a 3.2% dividend yield. The restaurant operator has steadily increased its dividend over the years. While the company cut it in 2020 due to the pandemic’s impact on its operations, it brought the payment back to its pre-pandemic level in 2021 and has grown its rate over the past few years. The company gave its investors an 8% raise earlier this year.

The restaurant operator should continue growing its dividend in the future. It’s continuing to expand its restaurant count and same-store sales, giving it more cash to pay dividends, and plans to open 50 new restaurants in fiscal 2024 while growing same-store sales by 2.5% to 3.5%.

In addition to organic growth, Darden recently acquired Ruth’s Hospitality Group in a $715 million deal. The transaction added 154 Ruth’s Chris locations. The company expects the deal will boost its earnings per share in fiscal 2024 while adding another concept to its growing menu of restaurants, positioning it for more organic growth.

Attractive and rising income streams

Southern Company, Brookfield Asset Management, and Darden Restaurants offer dividend yields that are more than double the rate of the S&P 500. On top of that, these companies should increase those payouts in the future. That makes them great options for investors who like dividends since these companies should supply a growing income stream with the potential to produce market-beating total returns.

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Matthew DiLallo has positions in Brookfield Asset Management. The Motley Fool has positions in and recommends Brookfield Asset Management. The Motley Fool has a disclosure policy.

If You Like Dividends, You Should Love These 3 Stocks was originally published by The Motley Fool

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