I'm Swiftly Acquiring These Three Exceptionally Generous Dividend Shares with High Yield Ratings for 2025
I'm Swiftly Acquiring These Three Exceptionally Generous Dividend Shares with High Yield Ratings for 2025
It's typical for income-focused investors to gravitate towards stocks offering exceptionally high dividend yields. The logic is straightforward: higher yields equal more income, as long as the companies are consistent cash generators.
However, I'm not an income investor. So what's driving my recent acquisitions of three ultra-high-yield dividend stocks for 2025? Let me explain.
Frontline performers
In recent times, I've bolstered my holdings in Enbridge (ENB 0.74%), Energy Transfer (ET 0.10%), and Enterprise Products Partners (EPD 0.51%). The common thread is that all three are leading players in the energy infrastructure sector – primarily focusing on transportation and storage.
Enbridge operates pipelines in both the US and Canada, and its status as the largest natural gas utility in North America is the result of acquisitions completed in 2024. Energy Transfer owns over 130,000 miles of pipelines across the US, while Enterprise Products Partners has over 50,000 miles of pipeline in the US, along with other assets such as natural gas processing trains and fractionation facilities.
What these stocks share in common is their generous dividends. Enbridge's current forward yield is roughly 6.5%. Energy Transfer and Enterprise Products Partners, being limited partnerships, pay out distributions instead of dividends. Energy Transfer's forward distribution yield sits at 6.9%, while Enterprise's forward yield is 6.7%.
Two notable qualities of these energy infrastructure companies are their track records of distributing cash to shareholders. Enbridge has increased its dividend for 30 consecutive years, while Enterprise Products Partners has boosted its distribution for 26. Although Energy Transfer temporarily reduced its dividend at the onset of the pandemic, its growth has since resumed.
Potential for strong returns in 2025
Energy Transfer has posted impressive gains in 2023, with a return of over 31%. While Enbridge and Enterprise Products Partners have not fared as well, their gains ponder in comparison. However, it's crucial to consider their total returns, rather than just their share price appreciation. Their high dividend yields provide them a significant advantage in delivering exceptional total returns.
I believe the political climate in Washington D.C. next year will favor midstream energy companies. President-elect Trump was known for promising policies that encouraged oil and gas production during his campaign, and with a track record to back it up, there's no reason to doubt his commitment to following through on that promise.
While increased drilling might negatively impact oil and gas producers' revenues and profits due to the law of supply and demand, midstream companies such as Enbridge, Energy Transfer, and Enterprise Products Partners stand to benefit. They make more money as the volumes of oil and gas they transport increase, offering a consistent source of income regardless of fluctuating market conditions.
Long-term perspective
While my focus is primarily on 2025, I must acknowledge that my longer-term strategy is also instrumental in my decision to invest in these stocks.
The growth of renewable energy sources like wind and solar may contribute to a reduction in oil and gas production over the next few years. Nevertheless, I don't anticipate a significant decline in overall oil and gas production, according to forecasts by the U.S. Energy Information Administration. In fact, U.S. oil production is predicted to increase modestly through 2050 with its baseline scenario, and in its most optimistic scenario, U.S. oil production could increase 48% by 2050 compared to 2022 levels. I firmly believe that Enbridge, Energy Transfer, and Enterprise Products Partners will continue to thrive as the demand for energy infrastructure remains strong.
For me, this means that these energy infrastructure companies have both short-term and long-term growth potential. The dividends they pay out today will help me in the future, contributing to a more comfortable retirement.
After expressing my disinterest in income investing, I've still chosen to invest in Enbridge, Energy Transfer, and Enterprise Products Partners due to their high yields. These energy infrastructure companies, especially Enbridge with a 6.5% forward yield, offer attractive dividend opportunities. I believe their resilience, even in fluctuating market conditions, and potential for strong returns, along with their long-term growth potential in the energy sector, make them wise investments for my future financial goals.
These companies' significant assets in the energy infrastructure sector, such as pipelines and storage facilities, provide them a competitive edge, ensuring a consistent income stream, regardless of market volatility. Additionally, with the political climate favoring midstream energy companies, these companies are expected to benefit from increased drilling, leading to higher volumes of oil and gas transported, thereby generating additional revenue.