Yield-hunters are always looking for stocks that not only offer attractive yields, but also impressive growth prospects. The key is to have a regular, growing income stream while preserving capital. A couple energy sector stocks right now offer this compelling risk-reward proposition: Enterprise Products Partners (NYSE:EPD) and TC Energy (NYSE:TRP). Let's see why these two stocks tick all the boxes on any income investor's checklist.

Enterprise Products Partners

Enterprise Products Partners' massive 9.4% yield makes it look like a risky stock. But the stock isn't really as risky as it appears. In fact, it is one of the most conservatively managed midstream -- think pipelines and infrastructure -- operators. Enterprise Products' debt-to-EBITDA ratio is one of the lowest among its peers.

EPD Financial Debt to EBITDA (TTM) Chart

EPD Financial Debt to EBITDA (TTM) data by YCharts

It is this discipline that allowed Enterprise Products to maintain its distributions (partnership speak for dividends) even when top companies including Kinder Morgan, Williams Companies, and Energy Transfer had to slash their payouts, directly or indirectly, after the 2014 commodity price rout.

In addition to conservative leverage, Enterprise Products' supports its payout with diversified operations and fee-based contracts that provide consistent cash flows. The master limited partnership managed to keep its distributable cash flow essentially flat in the latest quarter, relative to Q3 2019. Enterprise Products' distributable cash flow was 1.7 times its distributions for the quarter. The company has also reduced its capital spending in response to the changes in market demand due to the pandemic. Though the pace remains uneven, the demand for energy products is recovering.

A recovery in demand combined with reduced drilling and completion activity by most producers will likely result in oil and gas demand exceeding supply. That would be bullish for energy commodity prices. In the longer term, growing populations, especially from developing economies, will drive the growth in energy demand.

A positive longer-term outlook, conservative balance sheet, and diversified assets with fee-based cash flows make Enterprise Products a compelling buy for income investors. Moreover, the company is well-positioned to maintain its payouts even if commodity prices remain volatile in the near term.

TC Energy

Canadian midstream operator TC Energy offers an attractive yield of 5.6%. The company's operations are diversified across natural gas, liquids, and power and storage businesses. Its natural gas pipelines serve customers in the U.S., Canada, and Mexico.

For the first nine months of 2020, the company's comparable earnings remained flat at $2.9 billion Canadian Dollars. The key reason driving that stability amid volatile energy markets is TC Energy's regulated assets. Such assets allow the company to earn pre-approved regulated rates from its operations. Additionally, most of the assets that are not regulated are backed by long-term contracts. So the company's earnings generally don't fluctuate much due to short-term fluctuations in commodity prices.

Money Tree with dollars in background.

Image source: Getty Images.

TC Energy also has visibility related to its growth projects. The company plans to continue with its CA$37 billion of capital projects that are backed by commitments from potential customers. Around CA$22 billion of these are natural gas pipelines.

In 20 years, TC Energy has invested CA$110 billion into its businesses. Today it owns assets worth more than CA$100 billion. These investments helped the company increase its dividends for 20 consecutive years at a compound annual growth rate of 7%. Regulated and contracted cash flows, coupled with its growth projects, should help the company to raise its dividends by an expected 8% to 10% in 2021, and 5% to 7% after that.

TC Energy's cash from operations in the third quarter was about twice the amount it paid as dividends. That provides a great cushion to its dividend payments. The company has a debt-to-EBITDA ratio of 4.5 times, which is what midstream companies usually target. 

Diversified operations, reasonable leverage, stable cash flow, ample coverage, and secured growth projects make TC Energy's dividends compelling even in a volatile sector.

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.