Passive income is probably what you want if you're trying to live off your nest egg in retirement. That means you'll be looking at dividend-paying stocks. Three that should be on your radar screen today are Black Hills (BKH -0.63%), Chevron (CVX 0.37%), and Enterprise Products Partners (EPD 0.45%). Here's why.
1. Black Hills is a high-yield Dividend King
There's nothing exciting about Black Hills. And that's exactly why the stock, and its generous 4.8% dividend yield, are so interesting. For starters, the company is a regulated electric and natural gas utility. That means it has a monopoly in the markets it serves, but it has to get government approval for its rate increases and capital spending plans. Slow and steady growth is the best you can hope for. But given that it has achieved Dividend King status, slow and steady has worked out well for income investors over time.
But what about the future? On that score, Black Hills is kind of small, serving 1.3 million customers in parts of Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. But here's the exciting part: Customer growth in the areas it serves is nearly three times the rate of population growth in the United States. Customer growth supports capital investments in the utility sector, which supports rate increases. In other words, Black Hills' impressive dividend streak is likely to keep going.
2. Chevron is the strongest giant
Integrated energy giant Chevron competes with some of the largest energy companies on Earth. And its 36-year streak of annual dividend increases isn't the most impressive of the group. That would be ExxonMobil's (NYSE: XOM) 41 years. But there's one area where the company shines notably brighter than any of its closest peers: the balance sheet. Chevron's debt-to-equity ratio is the lowest among its peers, giving it more leeway to deal with the inherent ups and downs in oil and natural gas prices. Right now, the debt-to-equity ratio is a tiny 0.12, leaving Chevron well prepared for the next industry downdraft.
In fairness, ExxonMobil isn't far behind, with a still impressive debt-to-equity ratio of 0.2. But here's the thing: If you're a dividend investor looking to maximize the income your portfolio generates, Chevron's 4.2% yield is a step above ExxonMobil's 3.9% or so. Add in the stronger balance sheet, and Chevron will probably be a better choice for most dividend investors looking for a dividend that can be relied upon for decades to come.
3. Enterprise is ready to charge a toll
Of course, investors might be worried about Chevron's carbon-focused business. But Enterprise Products Partners points out that demand for oil and natural gas, as projected by the world's most important industry watchers, is expected to remain strong through at least 2050. Current projections end at 2050 right now, but even after that point, demand for oil and natural gas, two of the most important global energy sources, is unlikely to fall off a cliff. So there's plenty of time for Chevron to produce oil and for U.S. midstream giant Enterprise to help producers move it around the world.
The key for Enterprise is that it charges fees for the use of its pipelines, storage, transportation, and processing assets. The price of the commodities it moves is less important than demand. Even when energy prices are weak, demand tends to remain strong. So the fat 7.4% distribution yield here is backed by a reliable stream of cash flows, which helps explain the 25-year streak of distribution increases Enterprise has racked up. There's no reason to think that streak is going to end.
Decades of dividend growth ahead for this trio
There's no way to predict the future, but when you look at Black Hills, Chevron, and Enterprise, you see they all have strong businesses and ample opportunity to keep supporting their attractive dividends in the future. Add in generous dividend yields, and even the most conservative income investors will probably find at least one, if not more, of these stocks appealing today.
