It's always wonderful when you discover something unknown and amazing -- like the movies "Idiocracy" or "Vernon, Florida," or the 1,000-year-old Japanese Pillow Book of Sei Shonagon. There are little-known stocks thta are amazing, too. For example, odds are good that a person chosen at random in a crowd won't have heard of Warren Buffett's company, Berkshire Hathaway -- but it has averaged annual gains of about 20% over more than 50 years.
Here, then, are introductions to three little-known but amazing dividend stocks. They don't have compounded growth rates of 20% over 50 years (very few companies can match that), but they offer great promise and solid income: Digital Realty Trust ( DLR 1.38% ), Enterprise Product Partners ( EPD -0.14% ), and Enbridge ( ENB 2.19% ).
Digital Realty Trust
If you're familiar with real estate investment trusts (REITs), you know they're companies that own a lot of real estate property, usually of a certain type, such as apartment buildings, medical facilities, retail centers, office buildings, and so on. You may also appreciate that they're required to pay out at least 90% of their income to shareholders, which often makes for attractive dividend payments.
Digital Realty Trust is a REIT, but its niche is a bit unusual -- it focuses on data centers -- those places where gobs of computers and related equipment store, process, and make available data used by people and companies alike. For example, all that information -- files, photos, passwords, and so on -- that you've got stored in "the cloud" is really stored on earth, in data centers. As you might imagine, data centers are growing in number: data center infrastructure spending is expected to grow to $200 billion in 2021, up 6% from 2020, per research from Gartner.
Digital Realty Trust recently sported a dividend yield of 3.3%, and it has upped its payout by an annual average of 5.7% over the past five years. Its stock has averaged annual growth of 15.3% over the past decade, with dividends reinvested.
Enterprise Product Partners
Enterprise Product Partners L.P. offers a much fatter dividend than Digital Realty Trust -- it recently yielded 8.8%! That's in part because the stock has fallen more than 25% in this challenging year.
Enterprise is a midstream-focused energy stock. Oil and gas companies are often categorized as having either an upstream, downstream, or midstream focus. Upstream companies explore for and extract ("produce") oil and/or gas. Downstream companies include refineries, and they are busy converting oil and/or gas into usable products, such as gasoline, heating oil, plastics, and more. Between the upstream and downstream are the midstream businesses, which primarily transport and store the oil and/or gas.
Enterprise's assets include about 50,000 miles of pipelines; 260 million barrels of storage capacity for natural gas liquids (NGLs), crude oil, refined products and petrochemicals; and 14 billion cubic feet of natural gas storage capacity. Much of its revenue comes in the form of fees paid by other companies to use its assets, and those fees don't rise and fall in line with the changing price of oil or gas -- though business can shrink when demand for energy shrinks, as it has during the pandemic. That's most likely not a long-term problem, though, so Enterprise's future remains promising as long as we're using fossil fuels, which are not going away anytime soon.
Note that Enterprise Product Partners is not an ordinary common stock; it's a master limited partnership (MLP), which means you should be prepared for it to complicate your taxes a bit.
Enbridge is another midstream specialist, collecting much of its revenue from its pipelines transporting liquids -- which transport about a quarter of all the crude oil produced in North America. It also transports roughly a fifth of all the natural gas used in the U.S. Based in Canada, its utilities business serves about 3.7 million customers in Quebec and Ontario. It even generates renewable energy -- recently about 1,750 megawatts -- and it's building more offshore wind farms. One knock against the company is that it's carrying a lot of debt, but that's not new for it, and so far it has been managing it.
Enbridge's stock was recently 26% off its 52-week high, which helps explain why its dividend payout is so high: It recently yielded a hefty 8.1%. The company has been paying dividends regularly for more than six decades, and increasing its payout by more than 10%, on average, over the past 25 years. With its solid management, diversified operations, and flexibility to grow its renewable energy business, Enbridge is well worth considering for a berth in your portfolio.
These are just three of the many great dividend-paying stocks out there. Don't make the mistake of ignoring the power of dividends, as they can really help your portfolio grow: Even when the underlying stocks stall, dividend income is likely to keep being delivered. A $300,000 portfolio with an overall average dividend yield of 4% will kick out $12,000 in cash every year -- a sum that's likely to be increased over time.