Dividend stocks are some of the smartest investments you can make. They've outperformed non-payers by more than two-to-one over the past 50 years, according to data from Ned Davis Research and Hartford Funds. The highest returns have come from companies that consistently increase their dividend payments.
Enterprise Products Partners (EPD +1.71%) and Verizon (VZ +1.15%) have excellent track records of increasing their dividends. With more growth likely, they're no-brainer dividend stocks to buy right now.
Image source: Verizon.
Ample fuel to continue growing the payout
Enterprise Products Partners has increased its payout for 27 consecutive years, every year since it became a publicly traded company. The master limited partnership (MLP), which sends investors a Schedule K-1 Federal Tax Form each year, has raised its distribution payment by nearly 4% over the past year. It currently yields 6.9%, well above the S&P 500's level (1.2%).
The energy midstream giant's high-yielding payout is on rock-solid ground. It generates lots of stable cash flow. Enterprise produced $1.8 billion of distributable cash flow during the third quarter, covering its payout by a comfortable 1.5 times. That allowed it to retain $635 million in cash. The MLP returned an additional $80 million to investors by repurchasing some of its common units during the quarter. It reinvested the remaining cash into expansion projects. Enterprise Products Partners also has one of the strongest balance sheets in the energy midstream sector, with a low 3.3 times leverage ratio and industry-leading A-/A3 bond ratings.
NYSE: EPD
Key Data Points
Enterprise Products Partners is investing heavily to expand its midstream operations. It's currently at the tail end of a multi-year expansion phase that began in 2022. It expects to invest $4.5 billion this year in major capital projects, with an additional $2.2 billion to $2.5 billion planned for 2026. These projects will expand its capacity and cash flow as they come online.
With its capital spending winding down and its cash flow on the rise, Enterprise Products Partners expects to produce more free cash flow in 2026 and beyond. That should enable the MLP to return even more money to investors through distribution increases and unit repurchases (it recently expanded its buyback authorization from $2 billion to $5 billion).
Robust and growing cash flows
Verizon extended its dividend growth streak to 19 consecutive years earlier this month by raising its payment by about 2%. The telecom giant's dividend currently yields 6.7%.
NYSE: VZ
Key Data Points
The mobile and broadband services provider's big-time payout is also on a very sustainable foundation. Verizon generates lots of recurring cash flow. It has produced $28 billion of cash flow from operations through the first nine months of this year. That covered its capital spending ($12.3 billion) and dividend payments ($8.6 billion) with room to spare ($7.2 billion).
The company used that excess cash to strengthen its already rock-solid balance sheet. Verizon ended the third quarter with a 2.2 times leverage ratio, down from 2.5 times at the same time last year. That helps support the company's rock-solid bond ratings (A-/BBB+/Baa1).
Verizon's strong balance sheet is giving it the flexibility to acquire Frontier Communications in a $20 billion all-cash deal. The acquisition will significantly expand its fiber network, enhancing its ability to grow its mobile and broadband businesses in the future.
While Verizon already generates lots of cash, the company believes it's falling short of its potential. That's leading the telecom giant to undergo an aggressive transformation to cut costs and reinvest those savings into customer-focused improvements that should enhance loyalty. It aims to expand its relationships with existing customers by having more sign up for both mobile and broadband services. This strategy positions it to generate even more free cash flow in 2026, supporting continued dividend increases.
Wise buys for dividend income
Enterprise Products Partners and Verizon pay high-yielding dividends backed by stable and growing cash flows, as well as strong balance sheets. They have the financial flexibility to invest in growing their businesses while increasing their big-time dividends. With more growth ahead, they're no-brainer dividend stocks to buy right now.
