High-yielding income stocks can be great investments. They can supply you with a steady stream of passive income. On top of that, the best ones can also deliver solid earnings growth, allowing them to steadily raise their big-time payouts.
If you're like most investors, you have a limited amount of money to invest. Because of that, you want to focus your portfolio on the best investments.
To help you narrow your options, a few Fool.com contributors have selected their top high-yield stock to buy now. Here's why they think investors should consider adding Enbridge(NYSE: ENB), Brookfield Infrastructure(NYSE: BIPC)(NYSE: BIP), or Enterprise Products Partners(NYSE: EPD) to their portfolio.
Enbridge has investors covered, today and in the future
Reuben Gregg Brewer (Enbridge): The energy landscape is slowly shifting as the world increases its use of cleaner energy sources. Canadian midstream giant Enbridge is positioning itself to benefit from this transition as it looks to supply the world with the energy it demands. And you can collect a fat 5.9% dividend yield, backed by 30 consecutive annual dividend hikes, while it does just that.
The big change within Enbridge in recent years has been increasing the company's exposure to natural gas investments while slowly letting oil pipeline assets decline in importance. Natural gas is cleaner-burning than coal or oil and has been boosted by the company expanding its position in both the natural gas pipeline and natural gas utility niches.
Oil pipelines, which are still highly profitable, are down to just 50% of earnings before interest, taxes, depreciation, and amortization (EBITDA), while natural gas now makes up around 47% of EBITDA (split between pipelines and utilities). All three businesses are reliable cash flow generators.
In addition to the pipeline and utility assets, another 3% of EBITDA comes from direct clean energy investments, like offshore wind farms. These assets are backed by long-term contracts and allow Enbridge to participate in the larger clean energy transition that's taking place in the world.
To be fair, the world is likely to need an all-of-the-above energy strategy, so there's plenty of time for this high-yield stock to transition its business (and reward investors with dividends all along the way). But given the diversity of its assets, all of the above is exactly what investors are getting with this reliable income stock.
Things have never been better
Matt DiLallo (Brookfield Infrastructure): Brookfield Infrastructure is coming off another strong year. The globally diversified infrastructure company (utilities, energy midstream, transportation, and data) grew its funds from operations (FFO) by 8% last year (and 10% after adjusting for foreign exchange fluctuations). The company benefited from strong organic growth of 7%, driven by inflation-linked rate increases, volume growth across its business, and commissioning over $1 billion of new capital projects.
The company's strong showing gave it the fuel to increase its dividend by another 6% this year. That's the 16th straight year of dividend growth for Brookfield Infrastructure (every year since its formation). The company's payout now yields more than 4%.
Brookfield sees plenty more growth ahead. "The momentum in our base business has never been better," wrote CEO Sam Pollock in the company's fourth-quarter letter to its investors. He noted that continued inflation, strong economic growth, and its record backlog of organic growth projects position it "to achieve strong organic growth in 2025 at the high end or above our target range" of 6% to 9%.
On top of organic growth, "we have entered 2025 with a pipeline of early-stage capital deployment opportunities that is the deepest it has been in years," stated Pollock. That strong M&A outlook supports the company's view that it can deliver more than 10% annual FFO-per-share growth over the long term. That outlook, along with the company's conservative dividend payout ratio of 67%, supports its view that it can continue growing its high-yielding dividend by around a 5% to 9% annual rate in the coming years.
With a high-yielding payout and robust growth outlook, Brookfield Infrastructure could produce strong total returns in the future. That makes it a great stock to buy for income and upside potential.
A rock-solid income stock
Neha Chamaria(Enterprise Products Partners): There are some great high-yield stocks out there one could buy today, but I'm picking Enterprise Products Partners for a reason.
There's a lot of uncertainty in the oil markets now, given President Donald Trump's stand on oil prices, clean energy, and tariffs, among other things. While it's hard to predict what'll happen and how oil and gas prices could react, Enterprise Products is the kind of stock that can not only navigate volatility, but also pay you regular and bigger dividends year after year, regardless of what the oil markets or the economy does.
Enterprise Products' stock currently yields a solid 6.3%, backed by stable and growing dividends. The midstream energy giant increased its dividend per share by 5% last year, marking its 26th consecutive year of annual dividend raises.
Enterprise Products' fourth-quarter numbers are about to be announced in early February. I expect the company to have exited 2024 on a strong note, given the 5% year-over-year growth in its distributable cash flow (DCF) in the third quarter. The company also projected capital spending of $3.5 billion to $4 billion on organic projects in 2025, up from its estimated range of $3.5 billion to $3.75 billion in 2024. This year's higher spending will likely be in the Permian Basin, where Enterprise Products expanded its footprint last year after acquiring Pinon Midstream in a debt-free, all-cash deal worth $950 million.
An extensive pipeline network that generates steady cash flows, steady capital spending that adds to growth, and a strong balance sheet comfortably support Enterprise Products' dividend growth goal. These factors make it a rock-solid high-yield stock to buy and hold.
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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, Enbridge, and Enterprise Products Partners. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has positions in Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Brookfield Infrastructure Partners and Enterprise Products Partners. The Motley Fool has a disclosure policy.
