Energy Transfer expects to increase its payout by 3% to 5% each year.
Chevron has raised its dividend for 38 straight years.
Brookfield Renewable has grown its dividend at a 6% compound annual rate since 2001.
10 stocks we like better than Energy Transfer ›
The energy sector is a great spot to find high-quality, high-yielding dividend stocks. It has the highest dividend yield in the S&P 500 index at 3.4%, nearly three times higher than the index (1.2%). Many energy companies have built resilient businesses that can withstand the volatility of energy prices, putting their high-yielding payouts on very sustainable foundations.
My top three energy stocks for dividend income right now are Energy Transfer (NYSE: ET), Chevron (NYSE: CVX), and Brookfield Renewable (NYSE: BEPC)(NYSE: BEP). These companies offer high-yielding and steadily rising payouts backed by strong financial profiles.
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Energy Transfer currently has a yield of more than 7.5%. The master limited partnership (MLP), which sends investors a Schedule K-1 Federal Tax Form, backs that payout with a very strong financial profile. It generates very stable cash flow as fee-based agreements supply 90% of its annual earnings. The company produced nearly $4.3 billion in cash during the first half of this year, $2 billion more than it distributed to investors. Energy Transfer retained that surplus cash to invest in organic expansion projects and maintain its strong financial profile.
The MLP’s leverage ratio is currently in the lower half of its 4 to 4.5 times target range. That puts Energy Transfer in the strongest financial position in its history. This provides it with ample financial flexibility to invest in organic expansion projects and make strategic acquisitions.
Energy Transfer expects to invest $5 billion in growth capital projects this year, with the majority of these projects coming online by the end of next year. They’ll provide the MLP with meaningful incremental cash flow. It recently approved several more projects, including the…
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