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Enbridge is a reliable dividend stock with a portfolio that’s shifting along with the world.
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Enterprise Products Partners’ substantial 6.8% yield looks safe and bankable.
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Kinder Morgan’s pipeline of expansion projects should give it fuel to grow its dividend.
The energy midstream sector has been a great spot for investors to go if they want to make some passive income. Many companies in this sector produce very stable cash flow as oil and gas flow through their pipelines and related midstream assets. That gives them money to pay lucrative dividends and invest in growing their businesses.
Enbridge (NYSE: ENB), Enterprise Products Partners (NYSE: EPD), and Kinder Morgan (NYSE: KMI) are among the top options, according to a few Fool.com contributors, for those seeking passive income in the sector. Here’s why this trio of midstream companies could help you create years of passive income.
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Reuben Gregg Brewer (Enbridge): The midstream sector is tied at the hip to oil and natural gas producers. But not every pipeline company is the same, and one notable standout is Enbridge. A key corporate goal is to provide the world with the energy it needs. Today, only around 75% of Enbridge’s earnings before interest, taxes, depreciation, and amortization (EBITDA) are linked to oil and natural gas pipelines.
That 75% is a solid core, to be sure, given that Enbridge is one of the largest midstream players in North America. And this foundation has handily supported regular dividend increases, with the annual streak now up to three decades. But long-term dividend investors need to pay particular attention to the other 25% of EBITDA.
The rest of the portfolio is split between regulated natural gas utilities and renewable power investments. Both of these businesses provide reliable cash flows, just like pipelines. However, the utility business tends to provide more consistent opportunities for capital investments, while clean energy investment is expected to grow materially in the years ahead. And both natural gas utilities and renewable power are moving Enbridge in the same “cleaner power” direction as the rest of the world. In other words, Enbridge is preparing today for the energy market of tomorrow.
With a huge 5.8% yield, 30 annual dividend increases, and a business that is changing with the energy needs of the world, Enbridge is the kind of dividend stock you buy and hold for the long term.
