3 income stocks to help you ring in the new year with a bang

By | December 23, 2023

Dividend growth hundred dollar bills arrow up

Dividend growth hundred dollar bills arrow up

As 2023 draws to a close, it’s time to look ahead to the new year. Many investors are already considering making changes to improve their portfolio performance in 2024.

Chevron (NYSE:CVX), Enbridge (NYSE: ENB)And MPLX (NYSE: MPLX) According to a few Fool.com contributors, they stand out as great income stocks to add to your portfolio to ring in the new year. This is why they think these stocks could negatively impact your portfolio’s income-generating potential in 2024.

Achieve the income accelerator in 2024

Neha Chamaria (Chevron): Chevron is one of the best oil and gas stocks in terms of dividend stability and growth. The oil and gas producer increased its dividend for the 36th year in a row in 2023, and you can safely expect another increase in January 2024. That’s because Chevron is entering 2024 with a bang, so much so that it has already announced a potential dividend. Next year the dividend per share will be increased by 8%.

The point is, Chevron is about to make an acquisition Hess Corporation in early 2024 in an all-stock deal worth $60 billion. Following the acquisition, Chevron will not only gain access to assets in the Bakken and the Gulf of Mexico, but also own a stake in the Stabroek block in Guyana. Chevron expects the combined company to grow production and free cash flow (FCF) “faster and longer” than Chevron’s current five-year guidance. The oil and gas giant currently expects annual FCF to grow by more than 10% through 2027.

That should also mean greater returns for Chevron shareholders in terms of both dividends and share buybacks. Chevron has already proven its worth as a dividend stock, yielding a solid 4.2% today. The best part is that the expected upcoming dividend increase of 8% next year is already greater than the average dividend growth of the past five years. In other words, 2024 should set the pace for higher dividend growth at Chevron, making it an even more attractive income stock to own as you enter the new year.

Enbridge just raised its dividend again

Ruben Gregg Brouwer (Enbridge): Canadian midstream giant Enbridge announced a modest 3% dividend increase at the end of November 2023. The dividend has been increased annually for 28 consecutive years, with the last increase heralding year number 29. Enbridge is a very reliable dividend stock if you want income consistency. are after. The dividend yield is an attractive 7.6%.

Don’t be alarmed by the higher yield. The reason the dividend yield is so high is because future growth is likely to be modest for the company, meaning the yield here will likely account for the majority of your return. That should be fine for you if you want to maximize the income your portfolio generates. Meanwhile, the dividend is supported by an investment grade rated company, with a cash flow payout ratio that’s right in the middle of the 60% to 70% target range. Simply put, there’s no reason to believe the dividend is at any risk.

Enbridge is not exciting. It’s a fundamental income investment around which you can build a portfolio, which may include more dividend growth-oriented stocks. If you’re looking at 2024—perhaps you’re retiring—Enbridge is the kind of stock that can help you ring in the new year with a healthy dose of income and without having to take on huge amounts of risk.

A high yield with a high growth rate

Matt DiLallo (MPLX): MPLX offers investors a huge income stream. The master limited partnership (MLP) currently pays a benefit that yields no less than 9.3%. The midstream company has increased its already huge payout every year since its founding in 2012, including by 10% this year.

That big payout is on a solid foundation. The company generates very stable cash flow, supported by long-term contracts with high-quality customers, including the parent company, refining huge Marathon Petroleum. The MLP produced more than $3.9 billion in cash in the first nine months of the year (up 7% from the same period last year). That was enough to cover distribution payments ($2.4 billion) and capital expenditures ($727 million), with $752 million remaining.

That excess cash helped shore up the already fortress-like balance sheet. MPLX ended the third quarter with $960 million in cash and a 3.4 times leverage ratio (comfortably below the 4.0 times ratio that stable cash flows can support). That gives it a lot of financial flexibility.

MPLX currently has several expansion projects under construction. It is expanding its natural gas and natural gas liquids long-haul and crude oil recovery pipelines in the Permian and Bakken basins to support growing production in those regions. It is also expanding its natural gas processing capacity in the Permian and Marcellus basins, driven by producer demand. The current slate of projects should come online in mid-2025, providing the company with incremental cash flow.

The MLP’s growing cash flows will give it more fuel to expand its distribution. Therefore, it should provide investors with a large and growing revenue stream in 2024 and beyond.

Should You Invest $1,000 in Chevron Now?

Before you buy shares in Chevron, consider the following:

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Matthew DiLallo has positions in Chevron and Enbridge. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has positions in Enbridge. The Motley Fool holds and recommends positions in Enbridge. The Motley Fool recommends Chevron. The Motley Fool has a disclosure policy.

3 Income Stocks to Help You Ring in the New Year with a Bang originally published by The Motley Fool

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