Dividend stock yields have hit extremely low levels lately. For the S&P 500, the yield sits around 1.1%, which is close to a historic low. This leaves income-seeking investors with fewer appealing choices.
But it’s not all doom and gloom. The pipeline sector actually offers some promising options. High dividend stocks are worth exploring, and there are three top pipeline stocks to consider. Holding these could provide you with dividend income for years to come.
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Enterprise Products Partners (NYSE:EPD) currently offers a distribution yield of 6%. This Master Limited Partnership (MLP) has consistently raised its cash distributions for 27 years in a row, including a 3.6% bump last year.
The midstream energy business of this MLP generates stable cash flows, supported by fee-based contracts and regulated rates. In the past year, it generated $7.9 billion in distributable operating cash flow, covering its high-yield dividend by 1.7 times and allowing for $3.2 billion reinvested in partnerships. The firm committed $4.4 billion to growth projects and an additional $632 million for acquisitions.
Right now, Enterprise Products Partners is working on a $4.8 billion major growth project, expecting to start commercial service by 2027. With a robust balance sheet positioning it well, this MLP has the financial capacity to support ongoing growth and maintain its high-yield dividends.
Energy Transfer (NYSE:ET) boasts a yield of 7.1%. The MLP had to cut its distribution by 50% in 2020 to enhance cash flow, but it has been increasing it quarterly since late 2021, with its current rate now about 10% higher than pre-pandemic figures. Energy Transfer aims for annual growth of 3% to 5% in its distributions.
Currently, MLPs are in the strongest financial position they’ve had. Last year, Energy Transfer recorded $8.2 billion in cash, easily surpassing the $4.6 billion it distributed to investors. Plus, its leverage ratio is comfortably within the lower range of its target level, allowing flexibility to invest in growth.
With plans to invest at least $5 billion in expansion projects this year, Energy Transfer has a robust pipeline of projects expected to go live by 2030. This momentum will likely bolster its distribution growth.
MPLX (NYSE:MPLX) offers the highest yield among these with 7.7%. This MLP has continuously raised its distributions every year since its inception in 2012, averaging 11.6% annual growth since 2022.
With solid high-yield dividends, it generated enough cash last year to cover its dividend by 1.4 times, while retaining significant cash for expansion. Its leverage ratio is a modest 3.7x, remaining well below the 4.0x mark that stable cash flow can support.
MPLX’s strong finances allow it to keep investing in growth. Last year, the company allocated $5.5 billion for growth initiatives and acquisitions, and it has plans to invest at least $2.4 billion in expansion projects slated to begin commercial service by 2029. These developments are expected to support mid-single-digit profit growth and continuous volume increases.
Overall, MLPs can be an exceptional source of passive income, maintaining stable cash flow while also facilitating continued business growth that can support future dividend rises. With their financial strength and growth potential, Enterprise Products Partners, Energy Transfer, and MPLX stand out as promising pipeline stocks worth considering for long-term income.
Before investing in Enterprise Products Partners, it’s a good idea to keep in mind the following:
Our analysts have pinpointed what they believe are the best 10 stocks available right now, and Enterprise Products Partners isn’t on that list. These stocks are projected to provide substantial returns in the coming years.
Now, about Netflix: This list was created back on December 17, 2004, and if you’d invested $1,000 then, it would be worth $511,411 now! Or take Nvidia, which was recommended on April 15, 2005; a $1,000 investment then would now be $1,238,736!
Currently, the average return for our stock advisor is 986%, compared to the S&P 500’s 199%, showcasing significant market outperformance.
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