Investing in the stock market is a great way to build long-term wealth and passive income. One method that stands out for its income generation is dividend investing. Dividend stocks can provide a steady, reliable payout for investors. Furthermore, dividend-paying stocks have consistently outperformed their non-dividend-paying peers.
In a study by Hartford Funds and Ned Davis Research, over 50 years, dividend-paying stocks have delivered an average annual return of 9.17%. In comparison, non-dividend payers have returned just 4.27%. Additionally, dividend stocks exhibit less volatility, making them appealing to those seeking stability and growth.
If you're thinking of diving into the world of dividend investing, here are three high-yield dividend stocks you can scoop up today.
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These midstream stocks deliver reliable, high-yielding dividends
Pipeline stocks can be a solid choice for investors seeking dividend income. Midstream companies serve a crucial function by moving oil, natural gas, and other resources from extraction sites to refineries and distribution centers.
Their extensive pipeline networks and well-structured agreements facilitate the flow of energy and ensure visibility into future revenue. With fees tied to long-term contracts, they enjoy financial stability, enabling them to reward their investors consistently.
These companies could do well under President Donald Trump and U.S. Secretary of Energy Chris Wright, who wants to "unleash the golden era of American energy dominance." Deregulation and opening up land for drilling could support more pipeline infrastructure projects to increase transportation and storage and boost pipeline operators' bottom lines.
Enterprise Products Partners (EPD 0.45%) is a top midstream operator, with its network of pipelines stretching over 50,000 miles. The company has significant storage capacity to help facilitate the movement of crude oil and natural gas, natural gas liquids (NGLs), and refined products.
NYSE: EPD
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It is also bringing significant projects online this year, with roughly $7.6 billion under construction. The bulk of these projects ($6 billion worth) will come online in 2025, with the remainder expected to go into service over the next three years. The company pays a dividend of 6.3% and has raised its payout for 26 consecutive years.
Meanwhile, Enbridge (ENB 0.90%) is coming off a record year and has expanded thanks to its acquisition of three U.S. natural gas utility companies from Dominion Energy for around $19 billion. The company said the deal would make it the largest gas utility on the continent by volume, shipping more than 9 billion cubic feet per day. Enbridge has a stellar dividend of 6.2% and has raised its payout for 30 consecutive years.
This fuel distributor has strengthened its financial position in recent years
Sunoco (SUN 1.68%) offers high-octane fuels, like 94 Octane, which delivers superior engine performance and efficiency. Sunoco Race Fuels are used for high-performance racing engines designed to provide maximum power and efficiency and are popular among racing enthusiasts.
Over the past decade, Sunoco has transformed to improve its financial position and grow its payout. In 2018, it sold 1,030 convenience stores to 7-Eleven for $3 billion and another 204 stores to 7-Eleven last year. The sales allow Sunoco to focus on fuel distribution and logistics.
NYSE: SUN
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The company has improved its financial position over the past several years, paying down debt and strengthening its balance sheet. This position allows it to make strategic acquisitions and grow its dividend payout. Sunoco currently pays a dividend yield of 6.1%.
Last year, Sunoco acquired NuStar Energy in a transaction valued at $7.3 billion. The move gives Sunoco another 9,500 miles of pipeline across 63 terminals while helping it diversify geographically. The deal is immediately accretive with 10% or more accretion by the third year, helping Sunoco expand its cash flow and grow its distribution payout.
These high-yield dividends come with the added tax treatment
Investors should remember that these operators are master limited partnerships (MLPs), meaning they don't pay taxes at a corporate level. Instead, the tax responsibility is passed on to investors, which could delay and complicate your taxes. While this means your taxes might get a bit more intricate come tax season, the extra work may be worth it for investors in search of passive income.
