This year was another tough one for investors in the energy sector. Most stocks declined in value again, despite the fact that oil prices improved, which has boosted the sector's profitability. So, with valuations and earnings going in opposite directions, many energy stocks currently sell for cheap prices, which is driving dividend yields to desirable levels. Two high-yield bargains to consider buying now are on the chart below: 

Dividend Stock

Current Yield

Price to Cash Flow

CorEnergy Infrastructure Trust (NYSE:CORR)



Crestwood Equity Partners (NYSE:CEQP)



Data source: CorEnergy Infrastructure Trust and Crestwood Equity Partners.

Businessman yelling into megaphone with money coming out of it.

These dividend stocks are too cheap to ignore. Image source: Getty Images.

The midstream landlord

CorEnergy Infrastructure Trust is the first of its kind in the energy sector. The real estate investment trust (REIT) owns traditional energy infrastructure assets, like pipelines and storage terminals, that a master limited partnership (MLP) would typically operate. However, instead of leasing space on its assets to several customers, CorEnergy secures a single tenant for its properties. Because of that, the bulk of its earnings comes from rental agreements, which provides it with very predictable cash flow to pay dividends. Currently, the company sends about 77% of its cash flow to investors each year, which is a comfortable level for a REIT -- many pay out more than 90% of their income. CorEnergy complements its healthy dividend coverage with a solid balance sheet, backed by a debt ratio of 26%, which is at the low end of its 25% to 50% target range. Those factors suggest the payout is on a firm foundation. 

Typically, REITs with a healthy balance sheet and well-covered dividend sell for a premium price. However, that's not the case with CorEnergy -- it sells for less than 10 times cash flow, while many REITs trade at 15 to 20 times cash flow.   

One reason CorEnergy sells for a cheaper price than peers is that it hasn't grown its dividend since 2015. However, that could change in 2018. For one thing, the company's top two tenants recently emerged from bankruptcy, which eliminated any doubt on the security of the company's leases since they came through the proceedings unaltered. The company also recently made its first acquisition in quite some time, buying an additional stake in one of its largest properties for $32.8 million, which will provide some incremental cash flow in 2018. That deal likely won't be its last since CorEnergy has about $146 million of liquidity and plans to target one or two acquisitions each year, investing between $50 million to $250 million per transaction. If it can complete a needle-moving deal, CorEnergy could finally start growing its dividend again, which should nudge its valuation closer to the average REIT.  

A gas pipeline under construction.

Image source: Getty Images.

Visible growth coming down the pipeline

Crestwood Equity Partners is a traditional MLP that operates pipelines and processing plants across several shale plays. These assets provide the company with fairly predictable cash flow since about 85% comes from stable fee-based contracts. As in CorEnergy's case, Crestwood's payout is on solid ground. The company can cover its distribution to investors with cash flow by a comfortable 1.2 times, and its leverage ratio is currently at 3.8, which is below its 4.0 target.

That healthy balance sheet and conservative coverage ratio should be enough to push Crestwood's valuation closer to the MLP average of about 15 times cash flow. However, the stock is currently trading well below that level primarily because, like CorEnergy, Crestwood's payout has been stuck in neutral. In fact, the last time the company adjusted its distribution was in early 2016 when it reduced the payout to free up cash, which it used to pay down debt and invest in growth projects.

That plan, however, appears to have worked, and Crestwood's cash flow is on pace to grow over the next few years as its expansion projects enter service. Based on that, the company believes it could start increasing its distribution in the middle of next year, and one analyst estimates that the company could boost it by at least a 5% annual rate through 2021. As those increases start accumulating, Crestwood's valuation should inch closer to the MLP average.

Income with upside

Crestwood Equity Partners and CorEnergy Infrastructure Trust both offer investors rock-solid income streams, which alone makes them great options for dividend-seekers. Moreover, since both trade for cheaper valuations than most peers, they have greater upside potential just from narrowing that gap. Both also appear poised to grow their income streams in the next year, which could enable them to restart dividend growth. Add those three factors together and these two dividend stocks could fuel compelling total returns for investors in the coming years, which is why now seems like a good time to buy. 

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.