In periods of rising inflation and slowing economic growth, investors often turn to the reliability of dividend stocks to see them through, and with good reason.

The asset managers at Hartford Funds looked at the performance of the S&P 500 going all the way back to 1930 and found that dividends accounted for 40% of the total return of the index over that 92-year period. Equally important, the dividend stocks in the index never had a decade where they produced a negative return.

Smiling person laying on pile of cash.

Image source: Getty Images.

The study also found that from 1960 on, dividends made up an astounding 84% of the index's total return. A $10,000 investment in the S&P benchmark index in 1960 would have resulted in share price gains equal to $796,000. Adding dividend returns and reinvesting them, though, transforms that same $10,000 into $4.9 million.

While you might be tempted to buy high-yielding stocks to juice the returns, simply chasing yield is a risky pursuit because many stocks with higher yields often carry higher risk. But that doesn't apply to every stock, so an investor needs to pick and choose which ones they want to invest in, and the following pair of dividend stocks happen to not only be solid income stocks, but they also offer above-average yields that you can hold onto forever.

Antero Midstream

Natural gas specialist Antero Midstream (AM 1.15%) is a midstream operator in the energy field. It owns gathering pipelines, compressor stations, and processing and fractionation plants, which separate hydrocarbon mixtures from natural gas into individual products, primarily for Antero Resources (AR 2.49%), an independent oil and gas company.

Because it operates on long-term, fixed-fee contracts, its exposure to fluctuations in commodity prices is relatively limited. For example, its gathering and compression agreement expires in 2038, while its water handling contract expires in 2035. As a result, its operating cash flows tend to be stable and highly predictable.

Yet Antero has been a miserable investment since its 2017 IPO, generating a negative 10% total return since its IPO. Why should investors think this is a forever stock? Part of the problem has been disincentives for new drilling and exploration, whether it's been low oil prices or government policies against building new pipelines, not to mention Antero's own large debt load, which stood at $3.1 billion at the end of the third quarter. 

But Antero has recently finished an extensive capital spending program (expenditures were 54% lower in the recent period) and it plans on aggressively paying down its debt, which should offer a substantial growth catalyst on its own. The midstream operator is transitioning to generating consistent free cash flow after dividends and it believes it can achieves it its leverage target of 3x or less by the end of 2024.

Its recent bolt-on acquisition of Crestwood Equity Partners' gas gathering and compression assets in the Marcellus shale region expands its own capacity without the need for significant capital investment. In doing so, Antero says the transaction should further enhance its FCF after dividends by over 10% through 2026.

Antero Midstream is trading at 14 times next year's earnings and just 8 times the free cash flow it produces.  While Antero Midstream doesn't ever really trade at much of a premium, it still indicates this company, whose dividend is currently yielding 7.9% annually, is worth adding to the long-term portion of your portfolio.

Natural gas pipelines.

Image source: Getty Images.

Enterprise Products Partners

Another midstream operator to consider is Enterprise Products Partners (EPD -0.17%), which primarily focuses on the pipeline transport of natural gas liquids (NGLs) -- such as ethane, propane, and butane -- and exporting them globally. It owns some 50,000 miles of pipelines, 23 NGL processing plants, 14 billion cubic feet of natural gas storage, and over 260 million barrels of storage capacity for NGLs, crude oil, refined products, and petrochemicals.

While Enterprise operates with long-term fixed-fee contracts like Antero, it also enters into contracts with take-or-pay provisions that allow it to get paid regardless of whether its customers accept delivery of the product.

Enterprise Products Partners is one of the largest master limited partnerships (MLPs), meaning it is required to pass along almost all of its profits to its shareholders in the form of dividends. There's plenty of cushion for future growth of its payout, too.

In the third quarter, its distribution was 56% of its adjusted cash flow from operations (CFFO), with its distribution coverage ratio, or the amount of cash flow available for distribution versus what it actually disburses to its shareholders, standing at 1.8.

That ratio should not go below 1.0 as it would imply the dividend is unsustainable. Furthermore, investors would find any MLP with a distribution coverage ratio close to 1.0 much too risky. Instead, they seek out a margin of safety while demanding growth capital spending come primarily from operating cash flows. Enterprise's own strong coverage ratio gives that peace of mind.

In its recently reported third quarter, Enterprise expects growth capex to be $2 billion for 2023, while it generated $1.9 billion in operating cash flows for the period. 

Stocks like Enterprise Partners can trail others when the markets are booming, so the key is to hold on through the cycles and reinvest when the stock lags. With its dividend yielding 7.7% annually, you'll likely be well rewarded for your patience and owning its shares for the long term.