Warren Buffett is a big fan of Chevron (CVX). His company, Berkshire Hathaway, owns 118.6 million shares of the oil giant, or about 6.8% of its outstanding stock. Those shares are currently worth $17.1 billion. That makes Chevron Berkshire's fifth largest holding, at 6.1% of its investment portfolio.
A big draw of Chevron is its high-yielding dividend. It supplies Berkshire with over $800 million in dividend income each year. However, Chevron isn't the only high-yielding dividend stock in the energy sector. Enbridge (ENB -1.62%), Brookfield Renewable (BEPC 0.31%) (BEP 0.42%), and Enterprise Products Partners (EPD -1.75%) stand out to a few Fool.com contributors as even better energy stocks to buy for a high-yielding income stream.
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Enbridge's energy approach is boring and high yielding
Reuben Gregg Brewer (Enbridge): Buffett's portfolio contains both public companies and a huge and varied collection of fully owned businesses. Energy is a big theme across both, with particular emphasis on utilities and midstream assets in Berkshire Hathaway's portfolio of owned businesses. Canada's Enbridge can give you exposure to both in one high-yield energy investment, given its lofty 5.9% yield.
The core of Enbridge's business is its midstream portfolio -- largely oil and natural gas pipeline and transportation assets -- which makes up around 75% of earnings before interest, taxes, depreciation, and amortization (EBITDA). The rest of the business is split between natural gas utilities and clean energy assets. What's notable here is that shifting along with the world's energy needs is a core business approach, so the current split will probably continue to shift in a "clean" direction. That means you can own Enbridge for decades to come and not have to worry that it will be left behind as energy sources such as solar and wind power grow.
The best part of the story, however, is the reliable dividend growth Enbridge has achieved. It has increased its dividend for 30 consecutive years. And while rapid dividend growth isn't likely, slow and steady is set to continue for the foreseeable future. Management's goal is distributable cash flow growth of roughly 5% a year through the end of the decade, with dividends likely to trail that figure higher over time. A huge yield and steady dividend growth from industries that Buffett likes is kind of hard to ignore.
The renewable energy supermajor
Matt DiLallo (Brookfield Renewable): I'm a big fan of Chevron. Like Buffett, I own shares of the top-tier oil stock.
However, there's one high-yielding energy stock I like even better: Brookfield Renewable. It's becoming a supermajor in the energy industry. With a focus on renewable energy and other sustainable solutions, it's in an even better position to grow its high-yielding dividend in the decades to come. Its yield is currently 4.7%, the same as Chevron's.
Brookfield Renewable operates a globally diversified clean energy business across all major technologies, including hydro, onshore and offshore wind, utility-scale solar, distributed energy, and storage. It also has a growing portfolio of sustainable solutions, including carbon capture and sequestration, biofuels production, advanced recycling, solar panel manufacturing, and global nuclear services.
The company's massive global scale has made it a partner to the world's leading companies in helping them meet their energy needs. For example, Brookfield signed a gargantuan deal last year to develop more than 10.5 gigawatts of renewable power for Microsoft in the 2026-2030 timeframe. That's eight times larger than the biggest single power purchase agreement (PPA) ever signed. The company has deals to supply power to many large corporations and utilities in the coming years. Those PPAs will supply Brookfield with stable and growing cash flow.
Brookfield's overall cash flow stability is another key reason I like it more than Chevron. Whereas Chevron's cash flow ebbs and flows with oil prices, Brookfield has contracted 90% of its power capacity for an average of 14 years. Those PPAs index 70% of its revenues to inflation.
The growth from inflation-driven rate increases, development projects, and other catalysts such as acquisitions powers Brookfield's robust growth profile. The company expects to grow its funds from operations per share by more than 10% annually through 2034. That growth is highly visible and increasingly secure and supports its plan to increase its high-yielding payout at a 5% to 9% annual rate.
Brookfield's combination of scale, diversification, clean energy focus, cash flow stability, and visible growth profile makes for an unbeatable combination.
A reliable Buffett-like dividend stock
Neha Chamaria (Enterprise Products Partners): Buffett invests in businesses and not just stocks. Chevron checks the boxes for his investing style, but there's another stock to consider given its wide moat, strong management, solid financials, and stable dividends. These are just some of the important characteristics Buffett likes to see in a stock he invests in, and Enterprise Products Partners offers all of these and then some.
Enterprise Products Partners provides crucial energy services to the economy by moving crude oil, natural gas, natural gas liquids, refined products, and petrochemicals through its pipeline spanning over 50,000 miles. Because Enterprise Products is one of the largest midstream energy companies in the U.S., the size and scale of operations provides significant cost and operational efficiencies. That, and management's judicious capital allocation strategies, largely explain why Enterprise Products boasts strong credit ratings and has consistently generated enough cash flows to cover a growing dividend for more than two decades.
Enterprise Products has increased its dividend every year since going public in 1998. That makes 26 consecutive years of dividend increases, which has translated into solid returns for shareholders over time. With Enterprise Products bringing $6 billion worth of major projects online this year, investors can expect its cash flows to grow further and support bigger dividends year after year. With the stock also yielding a hefty 6.7%, Enterprise Products is a great stock to buy if you want to own rock-solid businesses like Buffett.
