I love getting paid to invest, which is why I've filled my portfolio with income stocks. My favorites are those that not only pay generously right now but have visible growth on the horizon. That's because those investments tend to generate some of the highest total returns by producing both income and capital gains.
Three high-yield options that fit that mold are Brookfield Infrastructure Partners (NYSE: BIP), TerraForm Power (NASDAQ: TERP), and Crestwood Equity Partners (NYSE: CEQP). However, while that income with upside alone makes them ideal ones to buy for the long haul, each has a particular catalyst on the horizon that makes them especially compelling right now.
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Tapping the breaks to reaccelerate
Brookfield Infrastructure Partners has been an excellent income stock since its formation almost a decade ago. The global infrastructure giant has increased its payout at an 11% compound annual rate over that timeframe and now yields an attractive 4.8%. However, there's still plenty more growth up ahead.
Brookfield believes it can increase its payout by at least a 5% to 9% annual pace over the next several years. Though in the near-term, growth could be toward the lower end of that range because the company is currently selling some assets to raise cash so that it can invest in higher-returning opportunities it sees coming down the pipeline. Because of that near-term uncertainty, Brookfield's valuation has slipped a bit recently, with units slumping double-digits this year in anticipation of that slowdown. However, as the company puts its growing cash war chest to work, earnings growth should reaccelerate, which is why the recent sell-off makes it seem like now is a great time to buy this high-yield stock.
A bright future
TerraForm Power has struggled in recent years after taking on too much debt to quickly build a renewable power empire. Because of that, the company had to temporarily stop paying dividends in 2015 and use that cash to improve its balance sheet. However, its turnaround plan is working, which puts its financials back on solid ground. That has allowed the wind and solar power generator to reinstate its dividend this year, and it currently yields a very generous 6.8%.
However, as good as that payout is right now, there's plenty more to come. TerraForm believes that it can grow the dividend from that base at a 5% to 8% annual pace through 2022 driven by further cost-cutting, a recent acquisition, and other growth initiatives it has under way. With the company's turnaround plan starting to gain steam, now looks like an excellent time to buy this high-yield stock.
About to hit the gas
Crestwood Equity Partners currently offers the highest yield in the group at 8.1%. That's because, like TerraForm Power, the pipeline and processing MLP is coming off a couple of challenging years due to issues with its balance sheet, which has weighed on its valuation. However, the company's first-quarter results clearly show that those problems are in the past.
Meanwhile, with several expansion projects under way, the company expects to materially grow earnings and cash flow in the second half of this year and into 2019. That leads Crestwood Equity to believe that it could start sending more money to investors in the coming year either by increasing the payout or repurchasing units. With so much growth coming down the pipeline, this high-yield stock looks like a fantastic one to buy right now.
Income with ample upside
While I like a big yield as much as the next income investor, what I really love to see is an even bigger payday down the road. That's what this trio of high-yield stocks has to offer, which is why I'd buy any one of them right now.
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Matthew DiLallo owns shares of Brookfield Infrastructure Partners, Crestwood Equity Partners LP, and TerraForm Power. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.