If you have $10,000 in cash right now that you don't need for the foreseeable future, one of the best ways to make your money work for you is to buy stocks with strong growth catalysts and hold them for the long haul. Energy stocks, for example, offer tremendous growth potential right now if you know where to look.
With a seismic shift from fossil fuels to clean energy underway, you may be wary of investing in oil stocks. However, the use of fossil fuels won't fade away soon, and oil companies that are proactively transforming themselves to make it through the transition should win in the long run.
Rock-solid, high-yielding stocks in energy companies are particularly tempting. I believe the three stocks below are totally worthy of your money right now.
A transforming oil giant that yields 7%
TotalEnergies (TTE -0.09%) is one such company, going all out on renewable energy. TotalEnergies is spending big bucks on wind, solar, and energy storage, and expects its sales from oil products to drop to only 35% by 2030 (from 55% in 2019), and sales from natural gas to go up to 50%. By 2050, the company believes electricity generated from renewable sources could make up 40% of its total sales.
In short, TotalEnergies will no longer be an oil and gas giant as you've known it all along, but a broader energy company in the making with a significant stake in renewables. Meanwhile, its commitment to shareholders remains as firm as ever, as it strives to pay sustainable dividends through economic cycles. As evidence, even in an historically challenging year like 2020 when oil majors like Royal Dutch Shell and BP slashed dividends, TotalEnergies maintained its dividend throughout.
Right now, TotalEnergies yields a handsome 7%. But the stock is still trading at a significantly low forward price-to-earnings ratio of 8, suggesting strong potential growth in earnings. It's a compelling entry point for long-term investors.
This 7.9% yield is among the safest in energy
Another oil and gas stock on my radar right now is Enterprise Products Partners (EPD 0.16%). In fact, I believe it's currently one of the best high-yield dividend stocks you can buy, and I don't say that just because the stock yields a hefty 7.9%. I like Enterprise Products Partners more because it's increased dividends every year for 22 consecutive years, and should continue doing so.
Enterprise Products Partners is among the largest energy infrastructure companies in the U.S., and primarily deals in natural gas, a relatively clean fossil fuel. It's also the world's largest exporter of liquefied petroleum gas: It transports essential materials like natural gas, natural gas liquids, crude oil, and petrochemical products such as ethylene and propylene, and earns fees in return. This long-term contracted, fee-based business means that Enterprise Products Partners can generate steady cash flow and pay the bulk of it in dividends to shareholders.
If you think all oil and gas dividends are volatile, you might be surprised that Enterprise Products Partners generated enough cash flow to cover its dividends at least 1.3 times, even during the financial crisis of 2008-2009 and the succeeding oil glut in 2010. Last year, it covered dividends 1.6 times. Despite its soaring cash flow, Enterprise Products Partners' stock is among the few oil stocks trading really cheaply right now, making it a steal for any investor looking to park money for the long haul.
This 4.2% yield is poised to grow bigger
Clearway Energy (CWEN -0.34%) (CWEN.A) is an incredibly attractive dividend stock right now. Its yield of 4.2% is among the highest in the renewable-energy industry, and is backed by growing dividends.
Clearway Energy has more than 8 gigawatts (GW) of power generation capacity provided by wind, solar, and natural gas. It generates cash flow primarily under long-term contracts, and can therefore pay steady dividends.
Management has been aggressively focused on improving production efficiency and fortifying its balance sheet, so it expects to increase the dividend by 5% to 8% through 2023. Clearway Energy has already increased its quarterly dividend by 1.5% and 1.7% this year, which means there are still two more quarterly dividend increases to come in 2021.
If that entices you to buy the stock for the short term, you should know that Clearway Energy is already building a strong pipeline, particularly in partnership with parent Clearway Energy Group, to ensure it can meet its dividend-growth goal in coming years. The parent company, for example, has a pipeline of more than 10 GW in advanced development. A larger pipeline means more opportunities for Clearway Energy to acquire assets under dropdown deals and make more money.
Between its high yield, its dividend payout target of 80%-85%, and its dividend growth goal of 5%-8%, Clearway Energy stock is a winner in the making.