Top Undervalued Dividend Growth Stocks to Buy and Hold in August 2025

For long-term passive-income-focused investors, the search for undervalued dividend growth stocks hinges on three pillars: sustainable cash flow, resilient business models, and strategic growth visibility. In August 2025, three names stand out as compelling candidates: Brookfield Infrastructure Partners (BIP), Enterprise Products Partners (EPD), and Clearway Energy (CWR). These companies combine high yields with disciplined capital allocation, positioning them to deliver consistent returns in a low-growth macroeconomic environment.

Brookfield Infrastructure: A Dividend Powerhouse with Global Reach

Brookfield Infrastructure Partners (BIP) has cemented itself as a leader in the infrastructure sector, leveraging its diversified portfolio of utilities, transport, midstream, and data assets to generate stable cash flows. In Q2 2025, BIP reported $69 million in net income and $638 million in funds from operations (FFO), a 5% year-over-year increase. The company's FFO per unit of $0.81 and a 53% payout ratio (dividends as a percentage of FFO) highlight its ability to balance shareholder returns with reinvestment.

BIP's recent $9 billion acquisition of Colonial Pipeline and the $1.5 billion in new capital projects commissioned in 2025 underscore its growth-oriented strategy. With $5.7 billion in liquidity and a 6% dividend increase in 2025, BIP offers a compelling mix of yield and expansion potential. Investors seeking exposure to inflation-linked infrastructure assets should consider BIP's global footprint, which spans 30 countries and includes critical assets like water utilities and toll roads.

Historically, BIP has shown a positive reaction to earnings releases, with a 57.14% win rate over three days and a 71.43% win rate over ten days, according to a backtest from 2022 to 2025. The maximum return observed was 3.08% on day 11, suggesting potential for price appreciation following earnings announcements.

Enterprise Products Partners: Energy's Steady Cash Cow

Enterprise Products Partners (EPD) remains a cornerstone of the energy midstream sector, with $1.9 billion in distributable cash flow (DCF) for Q2 2025—up 7% year-over-year. The partnership's 1.6x DCF coverage for its $0.545 per unit distribution (a 3.8% increase in 2025) demonstrates its ability to sustain and grow payouts. EPD's 57% payout ratio of Adjusted CFFO ensures ample dry powder for reinvestment, with $4.0–4.5 billion in 2025 growth capex targeting Permian Basin expansions and NGL infrastructure.

EPD's $33.1 billion debt load is offset by $5.1 billion in liquidity, including $110 million in Q2 unit buybacks. Recent projects like the Neches River Terminal and 300 MMcf/d Permian processing facilities position EPD to capitalize on U.S. hydrocarbon demand. For investors wary of energy volatility, EPD's fee-based revenue model (85% of cash flow) and long-term PPAs with producers offer downside protection.

Clearway Energy: Renewable Energy's Dividend Catalyst

Clearway Energy (CWR) is redefining clean energy investing with a $152 million Cash Available for Distribution (CAFD) in Q2 2025, despite lower wind output and energy margins. The company's 1.6% dividend hike to $0.4456 per share and $405–440 million 2025 CAFD guidance reflect its resilience. CWR's $122 million acquisition of Catalina Solar and $65 million investment in a 291 MW storage portfolio highlight its growth trajectory.

With 12 GW of gross capacity and a $2.50–2.70 CAFD/share target for 2027, CWR is leveraging sponsor-driven development and repowering projects (e.g., Goat Mountain in Texas) to scale its contracted renewables portfolio. Its $1,298 million liquidity and $512 million revolver availability provide flexibility to fund growth while maintaining a 1.6x CAFD-to-dividend ratio.

Strategic Positioning for Passive Income

All three stocks share traits that align with long-term dividend growth:
1. High Yield with Safety: BIP (4.8% yield), EPD (5.2%), and CWR (3.8%) offer above-market yields with payout ratios below 60%, ensuring sustainability.
2. Resilient Cash Flows: Fee-based models, long-term contracts, and inflation-linked pricing shield these companies from cyclical downturns.
3. Growth Catalysts: BIP's global infrastructure expansion, EPD's Permian Basin dominance, and CWR's renewable repowering programs provide clear pathways for earnings and distribution growth.

Final Take: Buy and Hold for the Long Run

For investors prioritizing passive income and capital preservation, these three stocks represent a diversified, high-conviction portfolio. BIP's global infrastructure plays, EPD's energy midstream dominance, and CWR's clean energy transition align with macro trends like urbanization, energy demand, and decarbonization. With yields above 3.8% and growth catalysts in place, these names are well-positioned to compound value over the next decade.

Investment Advice: Allocate 30–40% of a dividend-focused portfolio to these names, with a focus on dollar-cost averaging to mitigate short-term volatility. Rebalance annually to maintain exposure to their growth drivers.
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