Interest rates (and leaves) are falling, but here are 3 dividends that should keep growing no matter what

After months of speculation, the Federal Reserve has finally started to cut interest rates. In addition, the Fed has indicated that it will continue to cut rates.

Lowering rates has far-reaching implications. You may have already noticed that your bank has lowered the interest rate on your savings account, or that rates on CDs and US Treasuries aren’t quite as attractive as they used to be.

However, while rates on some investments are falling like autumn leaves, many dividend stocks are expected to keep increasing their payouts. Enbridge (ENB -0.17%), Kinder Morgan (KMI 0.51%)and NextEra Energy (NO 1.29%) note several Fool.com contributors for their ability to increase their dividends despite changing market conditions. This makes them ideal for those who want to receive more income in the future.

Enbridge is not standing still

Reuben Gregg Brewer (Enbridge): The big draw for most investors with midstream giant Enbridge will likely be the company’s sizeable 6.6% dividend yield. It’s reasonable, noting that the dividend has been increased annually (in Canadian dollars) for 29 consecutive years. But Enbridge offers much more than just a dividend.

A key part of the company’s approach is to adjust its portfolio along with changes taking shape in global energy demand. That’s why the company’s portfolio includes oil pipelines, natural gas pipelines, natural gas utilities and renewable energy investments. Natural gas is expected to be a key transition fuel as the world moves to cleaner alternatives, and renewable energy is where the world is headed. But oil is still important, allowing Enbridge to use its oil-related profits to increase its exposure to natural gas and build things like wind and solar farms.

The most recent deal, buying three natural gas utilities from Dominion Energyis a great example of the lens. Before the deal, Enbridge generated 57% of its earnings before interest, taxes, depreciation and amortization (EBITDA) from oil. After the transaction, it will drop to 50%. As an added bonus, regulated natural gas utilities have very reliable, albeit slow, growth opportunities ahead of them. These businesses, which have expanded natural gas utilities from 12% of EBITDA to 22%, help strengthen Enbridge’s ability to achieve its long-term goal of 5% distributable cash flow growth.

Enbridge seems boring, but a high return backed by a slow and steady business becomes very interesting over time. Especially when the company intentionally adapts to the changing dynamics of the market it serves.

Fuel may continue to rise

Matt DiLallo (Kinder Morgan): Interest rates have acted as a headwind for Kinder Morgan in recent years. For example, the company noted in late 2022 that its distributable cash flow would hit $0.15 per share in 2023 due to the impact of higher interest rates. That’s because a quarter of the debt has a floating rate, meaning the interest expense on that debt rises and falls with the rates.

Despite this headwind, Kinder Morgan has continued to grow its high-yielding dividend, which is currently over 5%. It posted its seventh consecutive annual dividend increase earlier this year.

With interest rates falling, they will change from a headwind to a headwind for Kinder Morgan. Interest expense on the company’s floating-rate debt should decline over the next year, who will save you them money Meanwhile, lower rates will make it cheaper to refinance maturing debt and issue new debt to finance acquisitions as attractive opportunities arise.

Tariffs aren’t the company’s only tailwind. It capitalizes on the growing demand for natural gas supply liquefied natural gas export facilities and utilities, the latter being positioned for a increasing electricity demand from AI data centers. Kinder Morgan has already lined up $5.2 billion worth of expansion projects to support this growing demand. That includes a $1.7 billion pipeline project to deliver more gas to utilities in the Southeast, which should come online in late 2028.

The rest of Kinder Morgan gives a lot of visibility to its ability to grow its solid and stable cash flows. That growing cash flow should give the company enough fuel to keep raising its dividend for years to come, even as interest rates start to rise. Rising again.

Much power to continuing to grow their payouts

Neha Chamaria (NextEra Energy): NextEra Energy owns the largest US utility, Florida Power & Light, and is also the largest producer of wind and solar power in the world. The company relies heavily on debt to finance the growth of its utilities and renewable energy businesses, so lower interest rates should be good news for NextEra Energy shareholders in more ways than one, including dividends.

NextEra Energy has a solid dividend track record. Between 2003 and 2023, it grew its dividend at a compound annual growth rate (CAGR) of 10%, supported by around 9% CAGR in adjusted earnings per share (EPS). This dividend growth has generated significant returns for shareholders who have reinvested dividends over the decades and should continue to do so given NextEra Energy’s goals.

NextEra Energy targets 6% to 8% adjusted EPS growth and average 10% dividend growth per share through 2026, driven by increased cash flow for its growth investments in both businesses. For example, the company expects to invest between $65 billion and $70 billion in renewables alone over the next four years. Lower interest rates should reduce funding for growth for NextEra Energy, and these investments should boost its cash flows and support higher dividends. In short, this 2.5% dividend yielding stock should continue to increase its dividend payout year after year.