The dividend yield on the S&P 500 (^GSPC +0.19%) is approaching a record low. It's currently around 1.2%, near its low point hit in 2000. Because of that, most stocks don't offer appealing income streams these days.
However, there are some compelling income opportunities available. Enbridge (ENB +1.62%), Plains All American Pipeline (PAA +1.31%), and Brookfield Renewable (BEPC +1.77%)(BEP +1.18%) currently stand out to a few Fool.com contributing analysts for their payouts, which are several times higher than the broader market index. Here's why income-focused investors should consider these higher-yielding dividend stocks.
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Enbridge is built to pay you well today and tomorrow
Reuben Gregg Brewer (Enbridge): Three decades' worth of dividend increases back Enbridge's lofty 6% dividend yield. That's a pretty enticing story right there, given the paltry 1.2% yield on offer from the S&P 500, but it isn't the whole story.
Enbridge just so happens to be one of the most reliable midstream stocks you can buy, though even that doesn't complete the tale. The core of Enbridge's business is its oil and natural gas pipeline network. It charges customers fees for the use of its assets, which generates consistent cash flows regardless of the price of the commodities flowing through the company's system. So, it is actually a reliable energy stock, yet so much more than that, too.
NYSE: ENB
Key Data Points
One of Enbridge's key goals is to provide the world with the energy it needs. Which is why the company has been shifting away from oil and toward cleaner fuels like natural gas and renewable power. So, atop the pipeline foundation, it has also built a regulated natural gas utility business and a solar and wind power operation. All while maintaining an investment-grade-rated balance sheet and keeping its distribution well within its target range of 60% to 70% of distributable cash flows.
All in, Enbridge is trying to make sure that it can pay you a fat dividend right now and well into the future. Put it all together, and this 6% yielding midstream giant could be the dream stock you've been looking to add to your dividend portfolio.
A prodigious (and growing) passive income stream
Matt DiLallo (Plains All American Pipeline): Plains All American Pipeline currently has a dividend yield of more than 8%. That's nearly 7 times higher than the S&P 500's yield.
While a high dividend yield can be a warning sign that the company has a high risk profile, that's not the case with Plains All American Pipeline. The master limited partnership (MLP) generates very stable cash flow. Currently, 80% of its income comes from predictable fee-for-service agreements. That will improve to 85% once the company closes the sale of its Canadian natural gas liquids (NGL) assets.
NASDAQ: PAA
Key Data Points
That transaction will not only improve the durability of its cash flows but also enhance its financial flexibility. Plains All American Pipeline expects to generate about $3 billion in proceeds following the sale. It plans to use that money to maintain its strong balance sheet, make disciplined bolt-on acquisitions, and complete opportunistic repurchases. Putting that capital to work will help grow the company's cash flow per unit, enhancing its ability to distribute cash to investors.
Plains All American plans to grow its dividend by approximately 10% annually until it reaches its targeted dividend payout ratio of 160% (it expects this ratio to be around 175% this year). It can increase its distribution alongside its growing cash flow once it reaches its targeted payout percentage.
The company's high-yielding and sustainable payout makes it an excellent option for investors seeking an above-average passive income stream. While Plains All American is an MLP that sends its investors a Schedule K-1 Federal Tax Form each year, investors can also invest in its general partner (Plains GP Holdings), which pays a similarly high dividend rate without the potential tax complications (it sends a 1099-DIV).
A powerful payout
Neha Chamaria (Brookfield Renewable): Plenty of dividend stocks offer at least triple the S&P 500 index yield. But the most rewarding dividend stocks are also often the ones that back their yields with robust cash flows and grow their dividend payouts consistently over time. Brookfield Renewable is one such compelling dividend stock for income investors.
NYSE: BEPC
Key Data Points
Shares of Brookfield Renewable yield 4.6%, and the stock has increased its dividend every year since its formation in 2011, with its funds from operations (FFO) comfortably covering its dividend payout throughout that time. Over time, Brookfield Renewable's assets have grown by leaps and bounds -- the company is one of the largest publicly traded renewable energy players in the world today, with over 35 gigawatts of operational capacity and an even bigger pipeline spanning hydropower, solar energy, wind energy, and distributed energy and storage.
With more economies switching from fossil fuels to cleaner sources of energy and global megatrends like digitalization and data centers driving demand for power, Brookfield Renewable has massive growth catalysts ahead.
The renewable energy giant plans to invest $8 billion to $9 billion over the next five years and is confident of generating total annual returns of 12% to 15% for its shareholders. That includes a targeted 5% to 9% annual increase in dividends. Combining that dividend growth with the 4.5%-plus yield makes Brookfield Renewable one of the top high-yield dividend stocks to buy and hold.
