While investing in stocks is a proven way to build wealth in the long term, high-yield dividend stocks that provide you with passive income can make your money grow much faster. All you have to do is buy some top-notch high-yielding stocks with sustainable dividend payouts, and then sit back and collect those yields year after year.
The stock market sell-off is one of the best times to hunt for such passive income streams. Right now, stocks from top-performing sectors like oil are offering compelling opportunities to earn passive income for years to come. Here are two such attractive oil stocks yielding between 6.7% and 8% you'll want to check out right away.
This stock is about to become a Dividend Aristocrat
A double-digit percentage drop in its stock price over the past month or so has pushed Enterprise Products Partners' (EPD -1.86%) yield up to 8%. Even with a yield so high, Enterprise Products is one of the most reliable oil dividend stocks out there -- the kind of stock you'll want to add to your portfolio on any dip.
Enterprise Products' track record is testimony to how stable and reliable its dividends are. The company has increased dividends every year since going public in 1998, including in the years of exceptional oil price turbulence.
The best example is 2020, when oil prices turned negative for the first time ever. At a time when dividend suspensions and cuts became the norm in the oil sector, Enterprise Products still managed to hike its payout. That's because the company has prioritized paying out a sustainable and growing dividend and has always ensured it has the cash flow to back its objective.
In its second quarter, Enterprise Products generated record net income and distributable cash flow (DCF), which it judiciously used to pare debt and fund growth projects worth nearly $5.5 billion that are currently under construction. With no significant debt maturing until 2026, ample liquidity, a solid growth pipeline, and surging cash flows, Enterprise Products should be able to deliver reliable passive income with big yields for years to come. Also, the stock is only one dividend hike away from joining the elite Dividend Aristocrat group.
A solid turnaround story that's still underappreciated
Kinder Morgan (KMI -0.88%) is also a midstream oil company and generates predictable cash flow under long-term contracts. Its dividend track record is nowhere close to Enterprise Products, though. Kinder Morgan cut its dividend in 2016 during the energy market turmoil.
How can you then rely on Kinder Morgan stock for long-term passive income, you may ask? The answer lies in how far Kinder Morgan has come since 2016 and where it's heading.
The oil and gas infrastructure giant revamped its business aggressively over the past five years for greater financial flexibility. In doing so, it grew its free cash flow by nearly 80% during the period and primarily used the money to reduce debt and invest in growth. With the excess cash left, Kinder Morgan resumed dividend growth.
In fact, Kinder Morgan has more than doubled its dividend per share between 2016 and 2022, and its payout is well covered and looks sustainable, given the company's growth plans. Topmost is Kinder Morgan's efforts to ensure it isn't left out of the race as the world transitions from fossil fuels to clean energy. Almost 75% of its $2.1 billion backlog, as of June 30, is in low-carbon projects like renewable diesel and renewable natural gas.
Kinder Morgan's financial flexibility also allows it to take advantage of big opportunities as they arise. Its recent investments in liquified natural gas is a great example, as they clearly indicate Kinder Morgan's intention to cash in on surging demand for LNG. Since these growth moves put Kinder Morgan in an even better position to grow its cash flow and dividends in the coming years, they further add to the appeal of this 6.7%-yielding stock for those looking for some solid passive income.
