Reliable power is the lifeblood of modern society. All you need to do is live through one blackout, and you know just how quickly the world comes to a screeching halt without energy. That is why all investors should have some exposure to energy stocks.
Three attractive high-yield options to consider in the energy sector as February draws to a close are Chevron (CVX +3.36%), Enterprise Products Partners (EPD 0.89%), and Brookfield Renewable Partners (BEP 1.00%). Here's a quick look at each one.
Chevron: Oil and gas exposure
Oil and natural gas are two of the most important energy commodities. Chevron is a major producer of each one. The problem is that oil and gas are also highly volatile, so Chevron's earnings and stock price can be volatile, too. But it stands out as a good dividend stock for three important reasons.
Image source: Getty Images.
For starters, it has increased its dividend annually for more than three decades. Second, the business is diversified across the entire oil and gas value chain, which helps to soften the impact of the industry's normal swings. Third, Chevron has one of the strongest balance sheets in its peer group, giving it the financial leeway to support its business and dividend even when oil prices are falling.
With a well-above-market 3.8% yield, Chevron is a good option for even conservative investors who want direct exposure to oil and natural gas.
NYSE: CVX
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Enterprise: Avoiding the commodity risk
Enterprise Products Partners also operates in the oil and natural gas space, but it acts as a service provider to energy companies. Essentially, Enterprise charges companies like Chevron fees for using its energy infrastructure assets. It owns infrastructure such as pipelines, storage facilities, and transportation systems used to move oil and natural gas around the world.
As a master limited partnership (MLP), Enterprise is designed to pass income on to investors in a tax-efficient manner. However, the real attraction here is that the price of the commodities moving through Enterprise's system is less important than the volume. And volumes are usually strong even when oil prices are low because energy is so important to the world. The distribution has been increased annually for more than a quarter of a century.
NYSE: EPD
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For investors that don't want to take on commodity risk, Enterprise's lofty 6% yield will be very attractive. The yield will likely make up most of your return over time, but that's not likely to bother income lovers.
Brookfield Renewable Partners: Benefiting from the ongoing shift
If the ongoing shift from dirtier to cleaner energy sources has you worried about investing in Chevron and Enterprise, don't worry. You still have options, including Brookfield Renewable Partners and its attractive 5% yield.
As Brookfield Renewable Partners' name suggests, it is focused on clean energy investments. What makes it stand out, however, is diversification. It operates across North America, South America, Europe, and Asia. And it has assets in solar, wind, hydroelectric, storage, and nuclear power. It is a one-stop shop for investors seeking clean energy exposure (and for customers seeking a simple clean energy solution).
NYSE: BEP
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Although Brookfield Renewable Partners hasn't been around as long as Chevron or Enterprise, it already has a decade of distribution growth behind it. If you are focused on the energy transition, Brookfield Renewable Partners should be on your short list. Like Enterprise, the lofty yield is likely to account for a material portion of your return over time.
Big yields, attractive businesses
Chevron, Enterprise, and Brookfield Renewable Partners all offer a great combination of yield and fundamentally strong businesses. If you are a long-term dividend investor looking at the energy sector today, you'll likely find that one or more end up in your portfolio before February draws to a close.
