Dividend-paying stocks allow investors to generate steady income from their investment portfolios. Midstream companies, also known as pipeline operators, can be excellent dividend stocks with high yields. That's because these businesses tend to have long-term contracts that provide visibility into future earnings. Enterprise Products Partners (EPD 0.35%) and Energy Transfer (ET +0.29%) are two no-brainer dividend stocks with high yields. Here's why they could be good investments today.
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Enterprise Products Partners offers a reliable dividend
Enterprise Products Partners is an integrated midstream energy company that connects producers in major supply basins such as the Permian Basin to domestic consumers and international markets. The company has four business segments, but the bulk of its business is in processing natural gas into natural gas liquids (NGLs), fractionation, and transportation.
NYSE: EPD
Key Data Points
What makes Enterprise appealing is its integrated business and scale, with 50,000 miles of pipelines, 300 million barrels of liquid storage, and 21 deep-water docks. Its integrated business, which includes processing, transporting, and exporting finished products, helps it earn fees at multiple stages of the value chain and also makes its customer base stickier. On top of that, about 82% of its gross operating margin is fee-based, which helps protect the company from fluctuations in oil and gas prices.
Enterprise Products Partners' resilient business model has made it an excellent dividend stock, as evidenced by its 6.3% dividend yield and a 27-year history of raising its annual dividend payment to investors. With operational distributable cash flow providing a coverage ratio of 1.7x, Enterprise's dividend is well-covered, leaving $3.2 billion for future growth projects.
Energy Transfer is capitalizing on hyperscalers' demand for natural gas
Energy Transfer is a pipeline operator with over 140,000 miles of pipeline and assets across all major U.S. production basins. The company has jumped on the artificial intelligence boom and the data centers that power these algorithms. Last year, it secured multiple agreements with Oracle to supply 900 million cubic feet per day (MMcf/d) of natural gas directly to three of Oracle's data center campuses.
NYSE: ET
Key Data Points
The sheer number of pipelines it owns and operates gives Energy Transfer an advantage, enabling it to expand capacity by looping or adjusting pipes alongside existing lines. The company is considering repurposing one of its three existing NGL pipelines for natural gas service, which could help meet surging demand from AI data centers. Converting an existing pipeline rather than building a new one could potentially help it generate twice the revenue of NGL, while also avoiding the large capital expenditure of $800 million to $1 billion required to build a new pipeline.
Energy Transfer has a massive infrastructure footprint and is well positioned to ride the tailwinds of robust demand from hyperscalers for natural gas. Its 7% dividend yield makes it an excellent high-yield dividend stock to buy today.
