In today's yield-starved world, many investors have been forced into the stock market in order to generate decent returns. However, not every high-yield stock is worth owning, which is why income investors need to be picky about the stocks they choose to buy.

Which high-yield stocks do we like right now? We asked that question to a team of Motley Fool investors, and they picked General Motors (NYSE:GM)Pattern Energy Group (NASDAQ:PEGI), and Brookfield Infrastructure Partners (NYSE:BIP).

The word "dividends" on a pad, sitting next to a calculator, a pair of eyeglasses, and several $100 bills.

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A 4.3% dividend yield and a strong position for the future

John Rosevear (General Motors): It may be hard to see, given all of the investor attention on upstart Tesla (NASDAQ:TSLA), but a few of the old-line automakers are positioning themselves not just to survive as their industry is transformed -- but to thrive and profit.

Believe it or not, the standout in that group looks to be General Motors. This isn't your father's GM: Under CEO Mary Barra, GM has become a high-tech powerhouse that's determined to out-disrupt would-be Silicon Valley disruptors like Tesla.


  • The world is eagerly awaiting Tesla's Model 3, but GM has been shipping an affordable long-range electric vehicle since December, the Chevrolet Bolt EV. The Bolt isn't a sleek gotta-have ride like a Tesla, but here's what not-in-the-know investors miss: GM has the technology, it has the supply chain -- and it has more electric vehicles on the way.
  • Self-driving technology will be huge soon, experts say. And most of those same experts say that GM's subsidiary, Cruise Automation, is right in the mix, with advanced technology that should be ready to deploy before long. And like Tesla, but unlike just about any other automaker, GM already has a vehicle ready for self-driving technology: Yep, it's the Bolt.
  • Ride-hailing? Car-sharing? Fewer people owning their own cars? Lots of people are talking about it, but GM's on it: GM owns 9% of ride-hailing start-up Lyft, and 100% of Maven, a fast-growing urban car-sharing company. (And here's an insight: The Bolt's design is optimized for both. That's why it's not sexy like a Tesla: It's designed as a high-tech taxi, and it'll soon be a self-driving one.) 

GM is better-prepared for the future than most rivals -- and with its vast network of factories and manufacturing prowess, it's also better prepared than many would-be disruptors. But that's not the only reason why in-the-know investors are giving it a look: GM right now is generating terrific profits on SUVs and pickups that have continued to sell well, even while the U.S. market is starting to slow. 

With a strong investment-grade balance sheet, low debt, and a hefty cash hoard to see it through the next downturn, GM is well-prepared for the long haul -- and well-prepared to keep paying that dividend, even as the new-car markets cycle down. 

An underappreciated dividend

Travis Hoium (Pattern Energy Group): Renewable-energy projects are among the safest on the stock market today, something in-the-know investors should be aware of. New wind and solar projects are normally backed with 20 year-30 year contracts to sell energy to utilities, giving a very high probability the cash flows that justify the projects will make their way to project owners. And in the case of yieldcos, that cash flow is what pays the dividends investors count on.

One high-yield dividend stock with a bright future is Pattern Energy Group, a yieldco that primarily owns wind projects, but is adding wind and energy storage to the portfolio, as well. The stock currently yields 7.1% and the dividend has room to grow from there. 

Pattern Energy recently spent $105 million to acquire projects it says will be accretive to its dividend. And partnerships with Riverstone Holdings and the Public Sector Pension Investment Board will bring up to $1 billion new funding for development projects, and now leaves the pipeline of projects at 10 GW, with the hopes of nearly doubling the portfolio to 5 GW in 2020.

Investors looking for a high-dividend yield from high-quality cash flows should look closely at yieldcos. And Pattern Energy's 7.1% yield is among the industry's best. 

A winning formula

Brian Feroldi (Brookfield Infrastructure Partners): You may not realize it, but your current lifestyle is heavily dependent on a plethora of infrastructure assets. What kind of infrastructure assets am I talking about? Think power plants, roads, cell towers, and shipping ports, just to name a few. One company that has been profitable operating assets like these for years is Brookfield Infrastructure Partners.

Brookfield is a worldwide company that owns a variety of these one-of-a-kind infrastructure assets. The company decided to focus on infrastructure assets because they offer reliable cash flow and tend to be impossible to reproduce. (Can you imagine what it would take to create a rival shipping port or toll road from scratch?) The company then returns a portion of highly predictable cash flow to investors in the form of an ever-growing dividend, and uses the remainder to fund new growth projects.

This business model has worked out beautifully for long-term investors. The company hit the public markets in 2009, and since then, its total return has utterly smashed the S&P 500.

BIP Total Return Price Chart

BIP Total Return Price data by YCharts.

Looking ahead, the company believes that its assets and backlog should allow it to grow its payout by 5% to 9% annually over the long haul. With shares currently yielding 4.3%, that gives investors a decent shot at earning double-digit total returns. For income investors, it doesn't get much better than that.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.