Investing in high-yield dividend stocks is an easy way to convert idle cash to sit in your portfolio into a lucrative income stream. High-quality income producers can provide you with a steadily increasing income stream of dividend income.
Pipeline giants Enbridge (NYSE: ENB) And Partners for business products (NYSE:EPD) are among the no-brainers dividend stocks with a high return. They have superior track records in increasing their already significant payouts. With low stock pricesthey are ideal for people who currently have less than $200 to invest.
Lots of fuel to grow the payout
Canadian pipeline and utility operator Enbridge has a forward dividend yield of almost 7.5%. That means you can earn almost $7.50 in annual dividend income for every $100 you invest in the energy infrastructure company. Although US investors are subject to a 15% withholding tax (unless in an individual retirement account (IRA)), they would likely dividend taxes at least for companies that own a regular investment account.
Enbridge pays a very sustainable dividend. The company generates highly sustainable cash flow (98% comes from stable cost-of-service agreements or long-term contracts) and pays out 60% to 70% of that fixed income in dividends. It retains the rest to help finance expansion projects. Enbridge also has a strong balance sheet leverage ratio well within its target range. This gives the country additional financial flexibility to finance its growth.
The company currently has a huge backlog of expansion projects under construction, mainly low-carbon energy infrastructure such as gas pipelines and renewable energy projects. Enbridge also has additional investment capacity to make acquisitions. These factors contribute to the view that the company can grow its cash flow per share at around 3% annually through 2026, before accelerating to 5%. per year thereafter.
That growing cash flow should do that give Enbridge the fuel to further increase its dividend. The company has increased its payouts for 29 years in a row, including by more than 3% at the end of last year.
A rock-solid income stream
Master Limited Partnership (MLP) Enterprise Products Partners currently has a forward yield of over 7%. As an MLP, the income is the same largely tax deferred, making it an excellent way to generate passive income. There’s a caveat, though: MLPs ship Schedule K-1 Tax Forms every year (often later in the filing season), which can complicate your taxes.
However, the MLP’s sustainable and growing distribution payments can certainly make these tax complications worthwhile. Enterprise has increased its payout every year for a quarter of a century, including by more than 5% last year.
Enterprise Products Partners generates terribly stable cash flow, with the majority coming from assets backed by long-term contracts and government-regulated interest rate structures. The MLP currently produces enough money to cover the high-yield payout by as much as 1.7 times. This allows it to keep some money back to fund expansion projects. It also has a very strong one balance (it has the highest credit rating in the midstream sector), giving it even more financial flexibility to fund its continued expansion.
The MLP has several billion dollars worth of expansion projects under construction, which should come online in the first half of 2026. It has several other projects also in development, including a potentially needle-moving offshore oil export facility, which gives it great visibility into future growth. The company also has the financial flexibility to make opportunistic acquisitions.
Immediately strong financial profile and visible growth going forward, Enterprise Products Partners should be able to continue to grow its high-yield distribution.
High-quality, high-yielding dividend stocks
Enbridge and Enterprise Products Partners have exceptional growth records their dividend payments. With more growth likely, these are a no-brainer purchase for those looking to turn some idle cash into a lucrative and growing income stream.
Should you invest $1,000 in Enbridge now?
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Matt DiLallo holds positions at Enbridge and Enterprise Products Partners. The Motley Fool holds and recommends positions in Enbridge. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
2 No-Brainer High-Yield Dividend Stocks to Buy Now for Under $200 was originally published by The Motley Fool
