Investing in high-yield dividend stocks is a solid strategy for investors seeking regular income in addition to potential capital appreciation. Luckily, numerous companies are currently offering compelling yields.
However, it's important to note that higher yields often come with higher risks. Consequently, investors should focus on shares of companies with a growing earnings base and a solid history of dividend distributions. Companies with a growing earnings base are able to easily cover their regular payouts, making them dependable dividend stocks.
Considering these factors, Enbridge (ENB), Enterprise Products Partners (EPD), and Altria Group (MO) are three stocks that emerge as notable options for income investors seeking well-protected, high yields in 2024. Moreover, these companies have been consistently paying and increasing their dividends for decades, earning them the status of Dividend Aristocrats.
Let’s take a closer look at all three stocks.
Enbridge
Enbridge is an energy infrastructure company that owns liquid pipelines to transport and export various grades of crude oil (CLG24) and other liquid hydrocarbons. Moreover, it holds investments in natural gas (NGG24) pipelines, renewable energy assets, and operates natural gas utility business.
Enbridge’s assets are strategically positioned amidst crucial supply basins and strong demand-pull markets, allowing it to generate low-risk cash flow and grow its dividend year-over-year. Moreover, long-term contracts, power purchase agreements, and regulated cost-of-service tolling frameworks ensure that this energy company consistently generates predictable cash flows.
Thanks to its resilient business and stable cash flows, Enbridge has distributed dividends for about 69 years. Additionally, it has consistently raised its dividends for 29 consecutive years, demonstrating a CAGR of 10%. What stands out is that Enbridge's stock boasts a generous yield of 7.2% near the current levels.
Enbridge’s diversified portfolio, encompassing conventional and lower-carbon energies and disciplined capital allocation, positions the company well to generate resilient cash flows across various commodity and economic cycles. Further, the strong utilization of its existing network and strategic acquisitions will accelerate its growth.
Among the 15 analysts covering ENB, five advocate a “Strong Buy,” three suggest a “Moderate Buy,” five recommend a “Hold,” and two maintain a “Strong Sell” rating. The average price target for Enbridge stock is $40.68, which implies 12% upside potential from current levels.
Enterprise Products
Enterprise Products Partners provides the gathering, storage, and transportation of natural gas, crude oil, and other hydrocarbons. This midstream company’s integrated energy assets and long-term fee-based revenue contracts enable it to grow earnings in all market conditions.
The company’s steady financial performance has led it to increase shareholder dividends for 25 years. Further, its dividend has grown at a CAGR of 7%. EPD currently offers a high yield of 7.55%, and it has returned a total amount of $51 billion to its shareholders in the form of dividends and share repurchases.
Enterprise Products anticipates that its $6.8 billion in capital projects will be operational by 2025. This will contribute to organic growth and drive its future earnings, in turn supporting higher dividend payments.
Analysts’ sentiment toward EPD is largely positive, with 12 out of 14 rating it as a “Strong Buy,” while the remaining two analysts recommend a “Hold.” The consensus target price of $31.53 reflects a potential 20% increase from its current trading price.
Altria Group
Altria Group is a prominent tobacco company in the U.S., although the company is focusing on transitioning towards smoke-free products. What stands out is Altria’s strong emphasis on consistently growing dividends, which makes it a top-income stock.
It’s worth highlighting that Altria has increased its dividend at a CAGR of 4.3% from 2018 to 2022. Further, it paid $30 billion in dividends during the same period. Its payouts are backed by its growing earnings base, which expanded at a CAGR of 7.3% between 2018 and 2022.
In August 2023, Altria hiked its dividend by 4.3%. Including the recent increase, Altria has now raised its dividend 58 times in the past 54 years. Further, it offers a high yield of 9.5%.
Altria anticipates that its core tobacco business will be a key driver of its earnings in the coming years. The company’s earnings are forecasted to increase by mid-single digits annually through 2028. At the same time, it expects to grow its dividend at a similar rate.
Altria’s strong balance sheet, focus on increasing its total U.S. smoke-free net revenues, and reduction of debt all bode well for growth.
Among the analysts covering Altria stock, four recommend a "Strong Buy," six suggest a “Hold,” and one has a “Strong Sell.” The average price target for Altria stock stands at $45.92, implying a 14% upside potential.
