If you invest for income, collecting your dividends is the most important thing. You don't care what's going on in an industry or what the outlook is for the stock market. You want to get paid on time and, preferably, with regular dividend hikes thrown in the mix, too. If that sounds like you, Enterprise Products Partners L.P. (EPD 1.73%) and ExxonMobil Corporation (XOM 1.02%) are two dividends stocks you'll love.
Moving it
Enterprise Products Partners is one of the largest midstream oil and gas players in the country. It uses its network of pipes, storage, and processing facilities to get those fuels from where they are drilled to where they are used. Here's the interesting thing: The vast majority of its business is fee-based. That means volatile energy prices aren't that important to Enterprise -- only demand for its pipes and facilities.
Image source: Enterprise Products Partners L.P.
This helps explain why the partnership has been able to increase its distribution for 50 consecutive quarters (the annual streak, just so you know, is up to 20 years). That includes right through the deep oil downturn that started in mid-2014. Enterprise has also managed to keep an average coverage ratio of around 1.2 times of late, providing a layer of safety for its distribution.
Enterprise continues to invest for the future. It has roughly $6.7 billion worth of projects under construction today. Those projects will come online between now and 2019 and will support further distribution growth. This industry giant and its generous 6% (or so) distribution yield is a great option for dividend investors who hate risk.
The nimble giant
ExxonMobil, one of the world's largest integrated oil and natural gas companies, is another energy player that should be on the income short list. It has a roughly 3.7% dividend yield and, more importantly, it has increased its dividend every year for the past 34 years. You might highlight Chevron Corp.'s (CVX 1.39%) 29 years and 4% yield as a better deal, but there's more to a dividend increase than there appears.
Exxon increased its dividend in the second quarters of 2014, 2015, and 2016. Chevron increased its dividend in the second quarter of 2014 and the fourth quarter of 2016 -- it held the dividend steady for 10 quarters, two and a half years, in between. But because of timing, Chevron's annual dividend streak remained intact. Exxon's regular yearly increases are the better option if you don't like risk.
EPD Dividend Per Share (Quarterly) data by YCharts.
Exxon is one of the most conservative and best-run oil majors. For example, its long-term debt-to-equity ratio of around 15% is at the low end of the industry. Sure, it has added debt to maintain its capital spending and dividend through the oil downturn, like most of its peers, but it is still conservatively financed. On the operational front, it has long been among the industry's best performers on return on invested capital. This metric measures how well a company invests its shareholders' money.
Regular dividend hikes backed by a solid balance sheet and a well-run company. That's the kind of stock risk-averse investors could love, particularly since the yield is currently toward the high end of the company's historical range.
Prices change
Stock prices go up and down -- all investors know that. Dividend investors, though, know that those price swings often open up opportunities in dividend stocks that keep on paying in good times and bad. If you can step back from the stock price and focus, instead, on the dividend, your risk equation changes, and price volatility suddenly becomes an opportunity to own great dividend payers like ExxonMobil and Enterprise Products Partners. If you hate risk, you can easily take solace in the regular distributions this pair has continued to pay and grow despite one of the worst energy downturns in recent history.
