Dividends, dividends, more dividends! Today we recommend 3 high-yield stocks for you.

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

Enterprise product partners (NYSE:EPD), Onek (NYSE:OKE)and Brookfield Renewable Energy (NYSE:BEP)(NYSE:BEPC) In the opinion of some contributors, this is an excellent choice for investors looking for income. That’s why anyone interested in dividends should take a closer look at these three.

Businesses are happy to collect tolls

Reuben Greg Brewer (Enterprise Product Partners): The energy industry is generally divided into three segments: upstream (drilling), midstream (pipeline) and downstream (chemicals and refining). Two of these sectors, upstream and downstream, are highly volatile because they are largely driven by commodity prices. Another industry is midstream, which generates stable fee income and is therefore highly reliable. Enterprise product partners operate in the midstream.

Enterprise owns a large amount of critical North American energy infrastructure that helps transport energy around the world. Demand for oil and gas and the products it produces is far more important to Enterprise’s financial performance than the prices of the products passed through its systems. Even with lower oil prices, demand for energy tends to remain strong due to the fuel’s importance in the global economy. It is unreasonable to charge a small fee for the use of its pipeline, storage, processing and transportation assets. Not sexy, but reliable.

The proof is in Enterprise’s allocation, which has increased annually for 25 consecutive years. Although distribution growth may be slow, those looking to maximize the income generated by their portfolio will appreciate the massive 7% yield on offer here. That yield is backed by an investment-grade balance sheet and strong 2023 distribution coverage ratio of 1.7. In other words, the risk of allocation cuts appears low, while the likelihood of slower, steady growth appears high.

A major acquisition will drive dividend growth

Matt DiLallo (Oneke): Oneok has been one of the more durable dividend stocks in the midstream industry. Pipeline Company Oneok has kept its dividend stable and growing for more than a quarter of a century. While Oneok doesn’t increase its dividend every year, it has grown more than 150% over the past decade, significantly outperforming its peers.

The company expects to continue increasing its dividend in the future. Oneok is going through a transformational year. Last September, the company completed its $18.8 billion acquisition of Magellan Midstream Partners, creating a more diversified midstream company. The transaction provides a meaningful initial financial boost, with earnings growth expected in the coming years from cost savings and other commercial synergies.

In addition to this, the company has multiple high-return expansion projects under construction and development, and recently approved a $355 million project to expand the capacity of the Elk Creek pipeline, which will be completed in the first quarter of next year. Put into use. Construction of the Cactus Connect pipeline is expected to be approved this year, and these and other projects will provide it with additional cash flow in the future.

Oneok aims to return 75% to 85% of operating cash flow after capital expenditures to shareholders through dividends and share buybacks. It will retain the remainder to strengthen its already strong balance sheet. The company expects to increase its dividend by 3% to 4% annually. Starting in 2024, the dividend increased by 3.7% and now yields over 5%. With a high yield and significant growth, Oneok is an ideal choice for those who like dividends.

Strong revenue producer

Neha Chamaria (Brookfield Renewable Energy): The energy sector reflects several high-yield stocks, but if I were to pick one stock today, it would be Brookfield Renewable. That’s because this stock has a solid dividend record, and its growth plans suggest its dividend payments will get larger over time. In other words, Brookfield Renewable not only has a great yield, but it also looks safe and secure. Brookfield Renewable Partners’ stock currently yields 6.3%, while Brookfield Renewable Corporation’s stock returns 5.9%.

It’s a simple business model: Brookfield Renewables acquires and operates renewable energy assets and sells the power they produce under long-term contracts. Because electricity demand is fairly elastic to economic cycles, the company can generate stable, predictable cash flows. In fact, nearly 90% of Brookfield Renewable Energy’s cash flow is contractual, with an average contract period of 13 years, and electricity prices are linked to inflation, which can steadily increase the company’s income.

Brookfield Renewable, for example, expects escalating inflation to increase its funds from operations (FFO) per unit by 2% to 3% annually between 2023 and 2028. Combined with margin improvements, a development pipeline, and potential acquisitions, the company’s FFO per unit could easily grow by 10% or more annually over this period. This should give Brookfield Renewables enough room to grow its dividend by 5% to 9% annually. Given the company’s strong balance sheet, large project pipeline, and commitment to dividend growth, this means shareholders can expect double-digit percentage returns on their Brookfield Renewables shares each year. That provides a very compelling reason to consider this high-yield stock today.

Should you invest $1,000 in an enterprise product partner now?

Before buying shares of Enterprise Products Partners, consider the following:

this Motley Fool Stock Advisor The analytics team has just identified what they believe is 10 Best Stocks Investors can buy now… Enterprise Products Partners is not one of them. The 10 stocks selected could generate huge returns in the coming years.

stock advisor Provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. stock advisor The service has more than tripled the S&P 500’s returns since 2002*.

View 10 stocks

*Stock Advisor returns as of March 25, 2024

Matt DiLallo At Brookfield Renewable, Brookfield Renewable Partners and Enterprise Products Partners. Neha Chamaria No positions are held in any of the stocks listed above. Reuben Greg Brewer There are no positions for the above stocks. The Motley Fool holds a position in and recommends Brookfield Renewable. The Motley Fool recommends Brookfield Renewable Partners, Enterprise Products Partners and Oneok. Motley Fool has disclosure policy.

Dividends, dividends, more dividends! Today we recommend 3 high-yield stocks for you. Originally published by The Motley Fool

Source link

Related Articles

Leave a Reply

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

Back to top button