Dividends, dividends and more dividends! 3 high-yield stocks for you today.

By | March 26, 2024

It’s easy to like dividend stocks. The obvious reason is that they provide recurring revenue. Many dividend payers also offer growth through increasing income streams and capital growth potential.

Partners for business products (NYSE:EPD), One ok (NYSE: OKE)And Brookfield Renewable (NYSE:BEP)(NYSE: BEPC) stand out as great options for investors looking for income, according to a few Fool.com contributors. This is why those interested in dividends should take a closer look at this trio.

The Enterprise is happy to collect tolls

Ruben Gregg Brouwer (Enterprise Products Partners): The energy sector is generally divided into three segments: upstream (drilling), midstream (pipelines) and downstream (chemicals and refining). Two of them, upstream and downstream, are highly volatile because they are largely determined by commodity prices. The other, midstream, generates consistent fee income and is therefore very reliable. Enterprise Products Partners operates in the middle segment.

Enterprise owns a vast collection of vital North American energy infrastructure, which helps move energy around the world. The demand for oil and natural gas, and the products they are converted into, is far more important to Enterprise’s financial performance than the price of the products passing through the system. Even when oil prices are low, energy demand tends to remain strong due to the importance the fuel plays in the global economy. Collecting small fees for the use of the pipelines, storage, processing and transportation resources is not sexy, but it is reliable.

The proof is in Enterprise’s distribution, which has been increased annually for 25 years. While distribution growth will likely be slow, those looking to maximize income from their portfolios will appreciate the huge 7% yield on offer here. And that return is supported by an investment grade balance sheet and a strong 2023 benefit coverage ratio of 1.7. In other words, the risk of a reduction in distribution seems very low, while the chance of slower and steady increases seems very high.

A breakthrough acquisition will drive dividend growth

Matt DiLallo (Oneok): Oneok is one of the more sustainable dividend stocks in the midstream sector. The pipeline company has delivered dividend stability and growth for more than a quarter century. Although Oneok has not increased its payout every year, it has grown by more than 150% over the past decade, significantly outperforming its peers.

The company expects to further increase the dividend in the future. Oneok comes from a year of transformation. Last September, it completed its $18.8 billion acquisition of Magellan Midstream Partners, creating a more diversified midstream company. The deal provided a meaningful initial financial boost and visible profit growth through cost savings and other commercial synergies for years to come.

In addition, the company has several high-yield expansion projects under construction and development. It recently approved a $355 million project to expand the capacity of its Elk Creek Pipeline, which is scheduled to go into service in the first quarter of next year. It also expects to approve construction of its Saguaro Connector Pipeline this year. These and other projects will provide the company with additional cash flow in the future.

Oneok aims to return 75% to 85% of its cash flow from operations, after capital expenditures, to shareholders through dividends and share buybacks. The company will retain the rest to strengthen its already solid balance sheet. The company expects to increase the dividend by 3% to 4% annually. It started 2024 with a 3.7% dividend increase and now yields more than 5%. With a high yield and visible growth, Oneok is ideal for people who love dividends.

A powerful income producer

Neha Chamaria (Brookfield renewable): The energy patch contains several high-yield stocks, but if I had to pick one stock today, it’s Brookfield Renewable. That’s because this stock’s track record reflects dividend stability, while its growth plans suggest dividend payouts will grow over time alongside cash flows. In other words, Brookfield Renewable’s yield is not only high, but it also looks safe and reliable. While shares of Brookfield Renewable Partners are currently yielding 6.3%, shares of the Brookfield Renewable Corporation company are yielding 5.9%.

It’s a simple business model: Brookfield Renewable acquires and operates renewable energy sources and sells the energy it produces under long-term contracts. Because electricity demand is fairly resilient to economic cycles, the company can generate stable and predictable cash flows. In fact, nearly 90% of Brookfield Renewable’s cash flows are contracted, and the average contract term is 13 years. Moreover, the electricity rate is indexed to inflation and can therefore steadily increase the company’s turnover.

For example, Brookfield Renewable expects that an escalation in inflation will increase funds from operations (FFO) per unit by 2% to 3% annually between 2023 and 2028. Add in margin improvements, development pipeline and potential acquisitions, and the company’s FFO per unit could rise. can easily grow by 10% or more per year during this period. That should give Brookfield Renewable plenty of room to increase its dividend by between 5% and 9% each year. Given the company’s strong balance sheet, massive pipeline of projects and commitment to dividend growth, this means shareholders can earn double-digit annual returns from Brookfield Renewable shares. That makes for a pretty compelling argument for considering these high-yield stocks today.

Should you invest $1,000 in Enterprise Products Partners now?

Before purchasing shares in Enterprise Products Partners, consider the following:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Enterprise Products Partners wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor service has more than tripled the return of the S&P 500 since 2002*.

View the 10 stocks

*Stock Advisor returns March 25, 2024

Matt DiLallo holds positions at Brookfield Renewable, Brookfield Renewable Partners and Enterprise Products Partners. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Brookfield Renewable. The Motley Fool recommends Brookfield Renewable Partners, Enterprise Products Partners and Oneok. The Motley Fool has a disclosure policy.

Dividends, dividends and more dividends! 3 high-yield stocks for you today. was originally published by The Motley Fool

Leave a Reply

Your email address will not be published. Required fields are marked *