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When it comes to dividend stocks, some of the most reliable companies to focus on come from the infrastructure sector. However, for some stocks in this area, it's not just the track record that can impress investors. Rather, the high yields are also worth mentioning. Here are two to consider.
Healthy Dividend Coverage
The first is the Octopus Renewable Energy Infrastructure Trust (LSE:ORIT). The trust invests in a range of renewable energy projects, including wind and solar plants. It also has exposure to energy storage systems.
It makes money through the infrastructure it invests in, for example by selling energy to consumers. This creates good cash flow, which can then be used to pay dividends to investors.
Over the past year, the share price has fallen 24%. Part of the reason for this is “challenging macroeconomic conditions”that the management team pointed out in the semiannual report. This includes interest rates staying high for longer, making new debt more expensive to finance projects for Octopus.
However, the dividend coverage is 1.33 times, meaning current earnings per share easily cover the dividend payments. Additionally, there are exciting new initiatives starting shortly, including a new power purchase agreement with Sky UK from April. This should help increase revenue next year.
The dividend yield of 8.76% is very attractive. Although the risk of interest rates remaining high in 2025 remains, it is clear that the company has been able to address this in 2024.
Diversified infrastructure exposure
A second company that investors should consider is HICL Infrastructure (LSE:HICL). The stock offers investors exposure to a diversified portfolio of essential public and private infrastructure assets. These include hospitals, schools and transport networks.
Earn money by having long-term contracts with government entities, local authorities or private operators. The income received from these contracts provides the cash flow to pay shareholders. For this reason, the current dividend yield is just below 7%.
It's true that the share price is down 14% over the last year. This is a factor that has increased performance. The drop can be explained in part by a drop in the valuation of assets in the portfolio. Since the share price should closely track the net asset value of the portfolio, this makes sense. This remains a short-term risk for investors this year.
Investors may find this infrastructure stock attractive not only for its high yield but also for its diversified portfolio. You have exposure to a wide variety of projects as well as different clients. This should protect you against a black swan event in a particular area.
Overall, both income stocks could be attractive for dividend investors to consider including in the future.
