Three High-Yield Stocks Offering Generous Dividends for Today’s Investors

Three High-Yield Stocks Offering Generous Dividends for Today’s Investors

It’s easy to love dividend stocks. The obvious reason is that they generate recurring revenue. Many dividend payers also offer growth through a growing income stream and potential for capital appreciation.

Enterprise Product Partners (NYSE:EPD), Onok (NYSE:OK)And Brookfield Renewable Energy (NYSE:BEP)(NYSE:BEPC) stand out from a few Fool.com contributors as excellent options for income-seeking investors. Here’s why those interested in dividends should take a closer look at this trio.

Enterprise is happy to collect tolls

Ruben Gregg Brewer (Enterprise Product Partners): The energy sector is generally broken down into three segments: upstream (drilling), midstream (pipelines) and downstream (chemicals and refining). Two of them, upstream and downstream, are very volatile because they largely depend on commodity prices. The other, the middle sector, generates constant commission income and is therefore very reliable. Enterprise Products Partners operates in the midstream sector.

Enterprise owns an extensive collection of vital North American energy infrastructure, helping to transport energy around the world. Demand for oil and natural gas, and the products they are processed into, are far more important to Enterprise’s financial performance than the price of the products flowing through its system. Even when oil prices are low, energy demand tends to remain strong due to the fuel’s importance in the global economy. Charging small fees for the use of its pipelines, storage, processing and transportation assets isn’t sexy, but it’s reliable.

The proof is the distribution of Enterprise, which has increased every year for 25 years. Although distribution growth will likely be slow, those looking to maximize the income generated by their portfolios will appreciate the huge 7% yield on offer here. And this return is supported by an investment-grade balance sheet and a strong 2023 distribution coverage ratio of 1.7. In other words, the risk of a reduction in distributions seems very low, while the chances of a slower, steady increase seem very high.

Groundbreaking Acquisition Will Fuel Dividend Growth

Matt DiLallo (Oneok): Oneok has been one of the most sustainable dividend stocks in the midstream sector. THE pipeline company has provided dividend stability and growth for more than a quarter of a century. Although Oneok hasn’t increased its payouts every year, it has grown more than 150% over the past decade, significantly outpacing its peers.

The company plans to continue increasing its dividend in the future. Oneok has just experienced a year of transformation. It completed its $18.8 billion acquisition of Magellan Midstream Partners last September, creating a more diversified midstream company. The deal provided a significant initial financial boost and visible profit growth through cost savings and other business synergies for years to come.

In addition to this, 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 expected to come into service in the first quarter of next year. It also plans to approve construction of its Saguaro Connector pipeline this year. These and other projects will provide it with additional cash flow in the future.

Oneok aims to return 75-85% of its operating cash flow after capital expenditures to shareholders through dividends and share buybacks. It will keep the rest to strengthen its already strong balance sheet. The company plans to increase its dividend by 3-4% per year. It started 2024 with a 3.7% dividend increase and now has a yield above 5%. With a high yield and visible growth, Oneok is ideal for those who like dividends.

A powerful income producer

Néha Chamaria (Brookfield Renewable Energy): The energy sector has several high-yielding stocks, but if I had to pick one today, it would be Brookfield Renewable. Indeed, this stock’s track record reflects dividend stability, while its growth plans suggest its dividend payout is poised to increase over time along with its cash flow. In other words, Brookfield Renewable’s yield is not only high, but it also appears safe and reliable. While Brookfield Renewable Partners stock currently yields 6.3%, Brookfield Renewable Corporation stock yields 5.9%.

It’s a simple business model: Brookfield Renewable acquires and operates renewable energy assets and sells the electricity it produces under long-term contracts. Since electricity demand is quite resilient to economic cycles, the company can generate stable and predictable cash flows. In fact, almost 90% of Brookfield Renewable’s cash flow is contractual, and the average length of its contracts is 13 years. Additionally, the electricity rate is indexed to inflation and can therefore steadily increase the company’s revenue.

So, for example, Brookfield Renewable expects escalating inflation to increase its funds from operations (FFO) per unit by 2% to 3% per year between 2023 and 2028. Add to that margin improvements, a development pipeline and potential acquisitions, and the company’s FFO per unit could easily grow 10% or more per year over the period. This should give Brookfield Renewable enough room to increase its dividend each year by between 5% and 9%. Given the company’s strong balance sheet, huge project pipeline, and commitment to dividend growth, this means shareholders could earn a double-digit annual percentage yield from Brookfield Renewable stock. That makes a pretty compelling argument to consider this high-yielding stock today.

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Matt DiLallo holds positions at Brookfield Renewable, Brookfield Renewable Partners and Enterprise Products Partners. Néha Chamaria has no position in any of the stocks mentioned. Ruben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions with 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 yielding stocks for you today. was originally published by The Motley Fool

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