Devon Energy (DVN -2.75%) has a roughly 8.3% dividend yield today. Enterprise Products Partners (EPD -1.01%) has a distribution yield of about 7.5%. If you are a dividend-minded investor looking at the energy sector, both of these yields will likely attract your attention. But yield alone isn't going to be enough to figure out which one is the right fit for your portfolio. Here's what you really need to know.

Slow and steady

Midstream master limited partnership (MLP) Enterprise Products Partners owns energy pipelines, storage, processing, and transportation infrastructure. It largely gets paid fees for the use of its assets. The prices of the products flowing through the system are far less important than the volume of products it handles. As long as demand for oil and natural gas is strong, which generally remains true even during energy downturns, Enterprise will produce reliable cash flows.

Chart showing Enterprise Products Partners' dividend and price rising since 2020.

EPD data by YCharts

It is the regularity of the business that has allowed Enterprise to increase its distribution every year for 25 consecutive years. To be fair, distribution growth has been in the low to mid-single digits of late. While there is some opportunity for business growth, capital spending opportunities in the midstream sector are now pretty modest following a period of rapid industry expansion. But that's hardly a big deal when the starting yield is a lofty 7.5%. The distribution will represent the majority of an investor's return. 

So the big question for investors here is about distribution safety. A reliable business, as noted above, is good. So, too, is an investment grade rated balance sheet. And then there's the fact that Enterprise is only paying out around 60% of its cash flow from operations. In other words, there doesn't appear to be much to worry about.

Chart showing Devon Energy's dividend down, and Enterprise Products Partners' up slightly, since 2022.

DVN Dividend Per Share (Quarterly) data by YCharts

Ups and downs

Look at the graph above comparing the dividend history of Devon Energy to that of Enterprise. The difference couldn't be more stark, with Enterprise's distribution steady as a rock and Devon's rocketing higher and then turning notably lower. Devon didn't suddenly fall on hard times -- it simply has a variable dividend policy.

Devon is an upstream energy company, drilling for oil and natural gas in the domestic U.S. market. Its top and bottom lines are tied directly to the prices it fetches for these often volatile commodities. Big swings in revenues and earnings are the norm, not the exception. 

In an effort to better reward investors when times are good, the company has tied the dividend to financial performance. The dividend basically consists of a base dividend that the Board of Directors believes is sustainable, and a variable dividend that is driven by financial results. That variable dividend can fall all the way to zero, but, theoretically speaking, there's no upper limit.

Chart showing Devon Energy's price and dividend down since 2022.

DVN data by YCharts

Income investors looking for consistency in the dividends they collect will probably hate this. For this type of investor, Enterprise, despite a lower yield today, will be the winner of this match-up. But that doesn't mean that Devon doesn't have a place in any income portfolio.

For example, if you were to heat your home with oil or natural gas, you would be facing higher costs when Devon would be most likely to increase its dividend. So you would have something of a hedge against the commodity volatility by which you are directly affected. There's something to be said for that, especially if you are retired and living on a fixed income. The caveat, of course, is that you would have to go in knowing that you can't count on Devon's dividend staying where it is -- by design, it will change over time.

Which is right for you?

Most dividend investors are probably going to default to a reliable dividend, so Enterprise is likely to be the winner here. Slow and steady is hard to beat, especially when the yield is as high as the one Enterprise is offering right now. But for more active investors, Devon's variable dividend might hold some appeal because of the fact that it changes. This will likely include just a subset of investors, but an increasing income stream right when you are facing higher energy costs is hard to complain about. You just need to be ready to accept the dividend cuts that will come when energy prices head lower again.