Here’s how you can collect reliable yields of as much as 6.3% today in the energy sector.
Oil and natural gas are volatile commodities. They are also vitally important energy sources for a world that demands more energy each year. Even conservative dividend investors should probably have some exposure to the energy sector.
Here are three ultra-high-yield energy stock options for you to consider.
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The most boring energy segment
If you are a conservative income investor, the best choice in the energy patch is likely to be a midstream business like Enterprise Products Partners (EPD +4.62%) or Enbridge (ENB +2.15%). These companies own the infrastructure that helps to move oil and natural gas around the world. They charge customers fees for the use of their assets, so the price of energy isn’t particularly important to their financial results. Energy demand is a stronger driver, and it tends to remain high even when oil prices are low.
Enterprise Products Partners
Today’s Change
(4.62%) $1.53
Current Price
$34.63
Key Data Points
Market Cap
$75B
Day’s Range
$33.37 – $35.08
52wk Range
$27.77 – $35.08
Volume
15M
Avg Vol
4.1M
Gross Margin
13.52%
Dividend Yield
6.28%
The proof of their business model’s strength lies in their dividend history. Enbridge has increased its dividend annually, in Canadian dollars, for three decades. Master limited partnership (MLP) Enterprise has increased its distribution annually for 27 years. However, because they are generally slow-growing businesses, the yields tend to be high. Enbridge’s yield is 5.6%, with Enterprise’s yield coming in at 6.3%.
If you are looking to maximize the income your portfolio generates, either of these ultra-high-yield, boring energy stocks would be a great option for your income portfolio.
An energy-focused high-yield option
If you are looking for more direct exposure to energy, then you’ll probably want to consider TotalEnergies (TTE +3.53%). It is an integrated energy company, meaning it has operations that span from oil and gas production (the upstream) to chemical and refining (the downstream). Being vertically integrated helps soften the impact of commodity price swings, though it can’t eliminate them.
Today’s Change
(3.53%) $2.54
Current Price
$74.42
Key Data Points
Market Cap
$161B
Day’s Range
$71.78 – $74.42
52wk Range
$52.90 – $74.42
Volume
2.3M
Avg Vol
807K
Gross Margin
12.56%
Dividend Yield
6.37%
The big story here, however, is that TotalEnergies is moving early to expand into electricity, notably including clean energy. The idea is to adjust as the world’s energy demand shifts, using oil profits to fund the transition. As an investor, you can collect a resilient 5.3% yield as it does this, noting that European peers BP and Shell both cut their dividends in 2020.
High-yield energy options
Energy is volatile, but you shouldn’t ignore the sector if you are a dividend investor. Enterprise and Enbridge are relatively low-risk and high-yield choices that even conservative investors will appreciate. TotalEnergies is a higher-risk company due to its direct energy exposure, but some investors may be looking for just that.
Reuben Gregg Brewer has positions in Enbridge and TotalEnergies Se. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends BP and Enterprise Products Partners. The Motley Fool has a disclosure policy.
