It's that time of year again. Many of us are working on our taxes or at least thinking that we need to get around to doing so eventually. Those who paid too much during the course of the year will get a refund check.
For many, it can be tempting to spend that windfall on a splurge. However, the more responsible move would be to save it for a rainy day or invest it. For example, putting those funds into a high-yielding dividend stock could enable you to collect a lucrative stream of income for years.
We asked some Fool.com contributors which great dividend stocks they'd recommend people buy with their tax refunds this spring. Here's why they view Enterprise Products Partners(NYSE: EPD), Clearway Energy(NYSE: CWEN.A)(NYSE: CWEN), and Brookfield Infrastructure(NYSE: BIPC)(NYSE: BIP) as standout picks.
Enterprise Products Partners is a mover, not a shaker
Reuben Gregg Brewer (Enterprise Products Partners): The energy sector is generally viewed as being volatile. That's true of the upstream segment (energy production) and the downstream segment (chemicals and refining), but it's much less so for the midstream segment (pipelines and storage). The midstream, where Enterprise Products Partners operates, simply helps to connect the upstream to the downstream (and the rest of the world). And in that part of the industry, commodity prices aren't nearly as important as energy demand, which tends to remain fairly strong no matter what prices oil and natural gas are fetching.
The consistency of Enterprise's business is highlighted by its streak of 26 consecutive annual distribution increases.
The master limited partnership's distribution, meanwhile, is backed by an investment-grade-rated balance sheet and a payout ratio (against adjusted cash flow from operations) of just 55%. This is a rock-solid business that clearly places a high priority on returning cash to its unitholders.
That said, there is a downside. The stock's high-yielding dividend is likely to provide most of the returns investors can expect. That's because most of the major investment opportunities in the midstream space have been exploited. Fee increases, modest capital investments, and the occasional bolt-on acquisition will help keep the distribution growing, but don't expect expansions to stray out of the low- to mid-single-digit percentage range. However, if you are focused on maximizing the income your portfolio generates, simply keeping up with inflation will likely be more than enough growth for you given the high starting yield on offer.
Generate a growing stream of dividend income
Matt DiLallo (Clearway Energy): Clearway Energy owns one of the country's largest clean power generation portfolios. Its wind, solar, battery storage, and natural gas assets produce stable cash flows backed by long-term, fixed-rate power purchase agreements with utilities and large corporate customers. The company pays out 80% to 85% of its cash flow via a dividend that at current share prices yields 6.5%.
Management aims to grow that high-yielding payout by about 6.8% this year and another 6.5% in 2026. Clearway has a clear line of sight toward the growth that should allow it to make those hikes. It has secured a large pipeline of investment opportunities that it expects to close as those renewable energy development projects enter commercial service and start producing cash flow.
Clearway also has increasing growth visibility into 2027 and beyond. The company has already committed to a couple of new investments that should support future dividend hikes. It has also signed new agreements to sell its natural gas power at higher rates. These drivers could power dividend growth toward the low end of its 5% to 8% annual target range in 2027. Meanwhile, its strategic relationship with a renewable energy development company should supply it with a steady stream of new investment opportunities to power further dividend growth within that range beyond 2027.
Clearway Energy pays a high-yielding dividend that should grow at a solid rate in the coming years. Because of that, investing your tax refund in this stock should give you a high-powered passive income stream.
This infrastructure company wants to pay bigger dividends every year
Neha Chamaria(Brookfield Infrastructure): A high yield can be alluring, but the best income stocks are the ones that pay and grow their dividends reliably. That's what makes Brookfield Infrastructure such a rock-solid pick. It has increased its dividend every year since its formation in 2008, and grew it at a compound annual rate of 9% over those years. Today, shares of the limited partnership (BIP) yield 5% while the company's corporate shares (BIPC) yield 4%.
Brookfield Infrastructure is one of the world's largest owners and operators of infrastructure assets, but the kind of assets it invests in makes all the difference. Think utilities, gas pipelines, rail, toll roads, and data infrastructure -- all of which generate stable cash flows under long-term contracts. That explains how Brookfield Infrastructure has been able to keep paying those dividends reliably. As for payout hikes, multiple factors such as inflation indexation and capital recycling have added to its cash-flow growth. Capital recycling in particular is a key part of Brookfield Infrastructure's business strategy as the company divests itself of mature assets and reinvests in new assets with a better return potential.
Brookfield Infrastructure entered 2025 on a strong note, having grown its funds from operations (FFO) by 8% and recycling assets worth $2 billion. It also announced a 6% dividend hike -- its 16th consecutive annual payout raise.
Management expects this to be another strong year and has already lined up assets worth $5 billion to $6 billion to sell. With such plans, I fully expect Brookfield Infrastructure to be able to hit its goal of growing its FFO per unit by around 10% and its dividend by at least 5% every year. That makes this high-yield stock worth a bet, and a great way to make use of your tax refund.
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Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, Clearway Energy, and Enterprise Products Partners. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Infrastructure Partners and Enterprise Products Partners. The Motley Fool has a disclosure policy.
