If you are about to retire and won't inherit a fortune, you probably want to invest a part of your savings in stocks that generate a steady dividend income to pad your bottom line. In addition to dividend income, you would also want to ensure that your capital is not exposed to unreasonably high risks.
Here are three top energy stocks that offer exactly what you are looking for.
Enterprise Products Partners
With 23 consecutive years of distribution growth, pipeline operator Enterprise Products Partners' (EPD -0.31%) record is remarkable. The midstream company has a huge asset footprint with 50,000 miles of pipelines, more than 260 million barrels of storage capacity for oil, natural gas liquids, petrochemicals, and refined products, and 14 billion cubic feet of natural gas storage capacity.
Enterprise Products Partners' huge, geographically diversified, and strategically located asset base allows it to grow its earnings steadily.
EPD EBITDA (TTM) data by YCharts
Importantly, Enterprise Products Partners is well known for its financial discipline. As the chart above shows, the company's ratio of debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) stands at 3.6 times. The ratio indicates the earnings available to pay back a company's debt. A lower ratio is better. Compraed to many of its peers, Enterprise has a more conservative balance sheet.
Moreover, Enterprise Products' distribution payments are well covered by its distributable cash flow (DCF). In the first quarter, the company's DCF was 1.8 times the amount it paid in distributions.
EPD Dividend Yield data by YCharts
The stock right now offers an enticing yield of 7%. Overall, Enterprise Products Partners is a top stock to add to your retirement portfolio.
Oneok
Oneok (OKE 0.55%) operates about 40,000 miles of natural gas and liquids pipelines. The company earns largely stable cash flow from its transport and storage activities, which allowed it to grow, or hold constant, its dividend for more than two and a half decades.
Oneok's earnings grew steadily over the years, despite fluctuations in oil and gas prices. The company's fee-based contracts are largely behind this stable growth. Oneok's natural gas liquids assets are connected to more than 200 processing plants. Likewise, its natural gas pipelines are connected directly to end markets. The strategic location of its assets ensures robust demand and volumes on those assets.
With a dividend yield of 6.2%, the stock is a solid buy for long-term dividend investors.
Enbridge
Canadian energy company Enbridge (ENB 0.20%) is primarily involved in the transport of oil and gas. Moreover, it distributes natural gas to consumers and operates renewable power assets. Enbridge generates highly predictable, utility-like cash flows backed by cost-of-service or take-or-pay contracts. As the name suggests, cost-of-service contracts allow Enbridge to charge rates based on costs that the company expects to incur to provide the service, along with a profit component. Take-or-pay contracts require customers to either use the contracted capacity or pay a penalty.
Additionally, a major chunk of Enbridge's contracts either have built-in revenue escalators or other regulatory mechanisms to recover rising costs. Such steady cash flows allowed Enbridge to grow its dividend for 27 consecutive years.
Enbridge stock offers an attractive dividend yield of nearly 6.2% as of this writing. All in all, Enbridge stock makes a solid addition to a dividend portfolio.
