If you are looking for reliable high-yield dividend stocks, you'll want to start by looking at the businesses that back the dividends. Only companies that have a solid foundation can support your income payments over the decades ahead.
This is why you'll like TotalEnergies(NYSE: TTE) and its 5% yield, Brookfield Renewable Partners (NYSE: BEP) and its 5.4% yield, and Enterprise Products Partners(NYSE: EPD) and its 7.2% yield. Here's a look at each one of these passive income gems.
1. TotalEnergies is hedging its bets
When oil prices cratered in the early days of the coronavirus pandemic, BP(NYSE: BP) and Shell(NYSE: SHEL) both announced plans to shift toward clean energy. And they both cut their dividends.
TotalEnergies made the same pledge to grow its clean energy operations, but also stated that it was still looking to expand its traditional energy options, too. And it did not cut its dividend -- instead explaining that the dividend was important to shareholders and, thus, important to the company.
Since that point, BP and Shell have both walked back their commitment to clean energy and shifted back toward oil and natural gas. TotalEnergies hasn't shifted its focus at all. It is still growing its oil and gas operations, focusing on the best-quality assets, and investing in clean energy, a growing sector of the energy market.
History has proven that TotalEnergies has a better grasp than its European peers on what the energy future may hold. (For reference, U.S. integrated energy giants ExxonMobil and Chevron have stuck to oil and gas.)
If you like the idea of owning an energy company that clearly understands the environment in which it operates, understands how important dividends are to investors, and has a huge 5% dividend yield, then TotalEnergies is likely to be the kind of dividend stock you can comfortably own for decades to come.
2. Brookfield Renewable Partners is all-in on clean energy
The key for TotalEnergies' clean energy investments is that things like solar and wind power appear to have decades of growth ahead of them as the world increasingly looks toward cleaner power alternatives. If you'd like exposure to that without the baggage of oil and natural gas, you'll want to consider Brookfield Renewable Partners and its attractive 5.4% yield. (You can also buy a corporate share class, Brookfield Renewable Corp.(NYSE: BEPC), but the dividend yield is lower at 4.6% -- a function of higher demand for the nonpartnership structure.)
Brookfield Renewable, in either of its two forms, isn't your typical clean energy business. It is run by Brookfield Asset Management, which has a very long history of actively investing in infrastructure on a global scale. That means that Brookfield Renewable is always buying and selling assets across its hydroelectric, solar, wind, and storage-focused portfolio.
You can't think of Brookfield Renewable the same way you would a traditional regulated utility. And yet the business is designed around reliable cash flow-generating assets (power is sold under long-term contracts) and paying out a regular, growing income stream to investors. Over the past 20 years, the distribution has increased at a compound annual rate of 6%.
Given the multidecade runway that lies ahead for clean energy, there's no reason to believe that Brookfield Renewable is done investing its way to growth.
3. Enterprise Products Partners is a boring energy giant
If clean energy isn't for you, maybe you'll want to fall back on a boring carbon fuel business like Enterprise Products Partners. This master limited partnership (MLP) owns energy infrastructure that helps to move oil and natural gas around the world. The energy sector couldn't operate without businesses like Enterprise, which happens to be one of the largest midstream entities in North America.
The key here, however, is that Enterprise is a toll-taker. It charges fees for the use of its vast infrastructure network, which produces reliable cash flows throughout the energy cycle. In fact, oil and gas demand is more important to Enterprise than energy prices.
Even when oil prices are low, demand tends to be very resilient because of how important carbon fuels are to the world economy. The key, however, is that growth in clean energy isn't going to change that anytime soon.
In fact, oil and natural gas are going to remain vital to the world for decades to come. This means that Enterprise's fat 7.2% distribution yield will be well supported for decades to come, too.
Look under the covers when you examine dividends
There are plenty of stocks with big, fat dividend yields you could buy. But there are far fewer that you'll want to buy if you hope to collect dividends for decades into the future.
TotalEnergies, Brookfield Renewable, and Enterprise all have the businesses to support the income they throw off. They are the kinds of passive income investments you buy and hold for the long term.
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Reuben Gregg Brewer has positions in TotalEnergies. The Motley Fool has positions in and recommends BP, Brookfield Asset Management, Brookfield Renewable, and Chevron. The Motley Fool recommends Brookfield Renewable Partners and Enterprise Products Partners. The Motley Fool has a disclosure policy.
