With interest rates falling this year, it's gotten a bit tougher for yield-seeking investors to get an attractive payout. Many rate-sensitive investments -- including lots of higher yielding dividend stocks -- have risen in value as investors have piled in, which has pushed down their yields. Because of that, many income-seeking investors likely feel as if they need to take on a bit more risk to get a compelling payout.
However, there still are some stocks that offer compelling yields with a lower risk profile. Here are five great ones with payouts of at least 5% to consider buying.
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ONEOK: Current yield 5%
ONEOK (OKE 0.75%) has been a great dividend stock over time. The pipeline giant has delivered dividend stability and growth for more than 25 years. While it hasn't given its investors a raise each year, it typically goes long stretches where it boosts its payout every quarter. Its current streak stretches for the last eight quarters -- and the company increased its dividend 9% in the past year alone.
This trend should continue through at least 2021. Four factors drive that outlook.
First, ONEOK generates stable income, as more than 80% of its earnings come from fee-based contracts. Second, it has a conservative dividend-coverage level of 1.42 times its cash flow.
Third, its leverage level was 4.5 times debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) at the end of the third quarter, which is comfortable for a pipeline stock. And finally, thanks to the upcoming completion of more than $6 billion of expansion projects, ONEOK's earnings are on track to grow at an accelerated pace during the next two years.
These factors support the company's ability to keep growing its high-yielding dividend.
Enterprise Products Partners: Current yield 6.3%
Enterprise Products Partners (EPD 0.48%) has treated its investors like royalty over the years. The MLP has increased its payout in each of the last 22 consecutive years, including for the past 61 straight quarters.
That trend should continue for the next several years. Driving that view is Enterprise's top-tier financial profile and growth prospects. It currently boasts even better financial metrics than ONEOK and has $9.1 billion of expansion projects under construction that should come online through 2023. Because of that, Enterprise Products Partners should have plenty of fuel to continue giving its investors a raise each quarter.
Enbridge: Current yield 6.3%
Canadian pipeline-giant Enbridge (ENB 0.68%) recently reached an elite level as it has now increased its dividend for 25 straight years -- one of the main characteristics of a Dividend Aristocrat. The company fully expects to keep that streak going because it, too, has a solid financial profile and excellent growth prospects.
In Enbridge's view, it can grow its earnings by 5% to 7% annually after next year. That should enable the company to increase its payout by a similar rate since it can fully support its growth with internally generated cash and its top-notch balance sheet. It already has a large backlog of expansion projects under construction to drive its outlook for the next few years, with even more under development.
Williams Companies: Current yield 6.5%
Williams Companies (WMB 1.21%) has a bit spottier track record when it comes to paying dividends, as it slashed its payout a few years ago to shore up its financial profile. However, the pipeline company's leverage has been coming down, even as it's continued growing its cash flow. That's enabled it to increase its payout for the past few years.
Williams currently generates enough cash to cover its dividend by a comfortable 1.7 times. Meanwhile, it expects to grow its cash flow by about 5% next year, which should support a similar growth rate in its payout. Longer term, Williams Companies expects its earnings to increase by about 5% to 7% per year, which should support a similar growth rate in its dividend.
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Magellan Midstream Partners: Current yield 6.5%
Magellan Midstream Partners (MMP) has done a pretty good job growing its payout over the years. While the MLP hasn't increased its distribution every year, it's boosted it 70 times overall since its IPO in 2001, growing it at an impressive 12% compound annual rate during that time frame.
Magellan Midstream's current payout is on as solid a foundation as investors will find in the MLP space. It's tied with Enterprise Products Partners for the highest credit rating in the sector and currently covers its payout with cash by a comfortable 1.35 times, well above its 1.2 times target.
Because of that top-notch financial profile, the company has the financial flexibility to continue investing in expanding its midstream operations. It expects to invest $1 billion on expansion projects this year and spend another $400 million next year, which should give it the fuel to keep growing its payout each quarter for the next couple of years.
More than just high yields
What makes these dividend stocks stand out is that they offer income-seeking investors more than an attractive income stream. That's because they all have the financial flexibility to invest in expanding their operations, which should give them the cash flow to keep growing their payouts. That income with upside makes these high-yielders stand out as great ones to consider buying.
