Dividends have fallen out of favor over the years. Companies have de-emphasized dividend payments to retain more cash to reinvest in their business and make share repurchases. Because of that, the dividend yield on most stocks is relatively unattractive compared to other income-generation opportunities.
However, there are a few spots where investors can still get an attractive dividend yield. The energy industry stands out as it offers several appealing options, including Clearway Energy (CWEN.A +0.23%)(CWEN +0.46%), EnLink Midstream (ENLC +0.00%), and Kinder Morgan (KMI +0.64%). Each one yields more than 4%, making them a great way to energize your portfolio by supplying it with high-octane income.
High-powered dividend growth for the next several years
Clearway Energy operates one of the country's largest portfolios of renewable energy-generating facilities. In addition, it produces power from lower-carbon natural gas. Clearway sells its electricity to utilities and large corporate buyers under long-term, fixed-rate power purchase agreements. Those contracts supply it with steady and predictable cash flow to pay dividends.
NYSE: CWEN
Key Data Points
The company currently offers a 4.8% dividend yield, well above the S&P 500's 1.7% dividend yield. Even better, Clearway expects to increase that payout in the future. It's targeting dividend growth in the upper end of its 5% to 8% annual range through 2026.
Powering that plan is the company's capital recycling program. Clearway Energy sold its thermal assets for $1.35 billion in net proceeds in 2022. It's redeploying that capital into higher-returning renewable energy investments. Clearway has already secured transactions for the entire proceeds, which should close through next year. That gives it clear visibility into its ability to grow its dividend for the next few years.
Capturing a potentially enormous opportunity
EnLink Midstream operates pipelines, processing plants, and related midstream infrastructure. Those assets generate relatively stable cash flow as fee-based contracts and government-regulated rate structures back a significant portion of its earnings. That gives EnLink the predictable cash flow to support a dividend that currently yields 4.7%.
NYSE: ENLC
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The midstream company increased that payout by 11% earlier this year. It could continue rising in the future.
The company's strategy to capitalize on the massive carbon capture and storage opportunity is one factor driving that view. It's working with several companies on projects to repurpose existing pipelines and build new ones to transport carbon dioxide from capture sites to sequestration hubs. For example, it signed a long-term contract with ExxonMobil to transport carbon dioxide to a storage location it's developing in Louisiana. This business could be very lucrative for EnLink, potentially giving it lots of fuel to grow its dividend in the future.
The fuel and flexibility to continue growing
Kinder Morgan is one of the largest energy infrastructure companies in the country. It's a leading transporter of natural gas. It also handles oil, refined petroleum products, carbon dioxide, and other materials. The company's extensive infrastructure supplies it with very stable cash flow backed by long-term contracts and government-regulated rate structures. That gives Kinder Morgan the money to pay an attractive dividend yielding 6.3%.
NYSE: KMI
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The company has increased its payout in each of the last five years. It already unveiled plans to give its investors a 2% raise this year. Kinder Morgan could continue increasing its payout in the future.
Fueling that outlook is its organic expansion backlog. Kinder Morgan currently has $3.3 billion of projects under construction. Most of its projects support lower carbon energy, including natural gas pipeline expansions, renewable natural gas production facilities, and carbon capture and storage projects. Kinder Morgan also has a strong balance sheet, giving it the flexibility to make acquisitions as opportunities arise.
Energizing income streams
Clearway Energy, EnLink Midstream, and Kinder Morgan offer big-time dividends supported by stable cash flow streams. Those lucrative payouts should keep heading higher in the future as the companies execute their growth strategies. That makes them great investments for those looking to energize their portfolio with some high-octane income streams.
