The average dividend stock currently yields less than 1.5% according to the S&P 500 Index's Dividend yield. That's well below the long-term historical average of more than 4% because many companies have de-emphasized dividends in recent years.
However, there are some spotlights for those looking for high dividend yields. Several energy stocks They have enough fuel to grow their high-octane dividends in the The coming decade. Enbridge (NYSE: ENB) and Clearway Energy (NYSE: CWEN.A)(NYSE: CWEN) They are among the highest dividend-paying companies in the sector, with payouts yielding more than 5%. They expect to grow those large dividends in the coming years, making them excellent fixed-income stocks to buy and hold over the next decade.
A dividend-paying machine
Enbridge has been one of the best dividend stocks in the energy sector over the decades. The Canadian pipeline and utility The company has paid dividends for more than 69 years and has increased its payout for the past 29 consecutive years. It should have enough fuel to continue paying dividends for the next decade.
This vision is underpinned by the remarkable predictability and durability of its earnings. Enbridge has achieved its financial targets for 18 consecutive years. That includes two major recessions and two additional periods of oil market turbulence. Driving its predictability is the stability of its earnings, 98% of which comes from contracted assets or cost of service. Meanwhile, more than 95% of its earnings come from investment-grade-rated customers. while 80% of their earnings have protection against inflation.
Enbridge pays outside Between 60% and 70% of its very stable cash flow is in dividends. That payout currently yields more than 6.5%. The company's conservative payout ratio gives it plenty of room to maneuver as it grows. allowing him to retain billions of dollars in cash each year to fund its continued expansion.
The company at the moment has billions of dollars in capital projects secured in its portfolio, most focused on low-carbon energy, such as new gas pipelines, gas service expansions and renewable energy projects. It expects to complete these projects by 2028, giving it lots of Enbridge also has many more expansion projects underway that could broaden its growth prospects going forward. These projects help support Enbridge's view that it can grow its earnings by 5% annually for the foreseeable future. That should give the company the fuel to continue increasing its dividend at that same annual rate.
A growth plan fully driven in the short term with more to come
Clearway Energy is a leading company renewable energy producer. It also generates power from a portfolio of environmentally friendly natural gas-fired power plants. These assets generate highly predictable cash flow, which it uses to pay dividends. Clearway's payout currently yields more than 5.5%.
The company has tremendous near-term visibility into its ability to increase that payout. It expects to expand the dividend toward the high end of its 5% to 8% target range through 2026.
What drives that plan is its capital recycling strategy. Clearway cashed in on the value of its thermal power assets a few years ago and has been steadily investing the proceeds into of greater profitability investments in renewable energy. The company has now fully committed the entire amount, giving him a clear line of sight in its ability to increase its cash flow (and dividends) over the coming years.
Clearway should have enough fuel to continue growing beyond 2026. It has already begun to block in new energy sales contracts at its natural gas plants. The rates are entering high enough to support dividend growth toward the lower end of its target range in 2027 on this factor alone. In the meantime, it should have ample opportunities to continue making new investments in renewable energy, given the Unprecedented need for new capacity in the future.
Enough fuel to pay dividends
Enbridge and Clearway Energy currently offer large dividend yields. They back up those payments with very stable cash flow. The duo also has lots of Growth is ahead as demand for energy, especially low-carbon energy, increases. This makes them great stocks to buy and hold over the next decade as they should have the fuel to pay off and grow their dividends for years to come.
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Matt DiLallo has positions in Clearway Energy and Enbridge. The Motley Fool has positions in Enbridge and recommends it. The Motley Fool has a Disclosure Policy.
2 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade Originally published by The Motley Fool
