Reliable Income Stocks for a Steady Portfolio
When it comes to high-yield stocks, investors often focus solely on the yield itself. However, this can be a mistake, as high yields can sometimes indicate a risky dividend. It’s essential to examine the company behind the yield and its commitment to supporting the dividend through both good and bad markets.
Enterprise Products Partners: A Reliable Income Stream
One reliable income stock to consider is Enterprise Products Partners (NYSE: EPD). As a master limited partnership (MLP) operating in the midstream segment of the oil and natural gas industry, Enterprise owns vital infrastructure assets like pipelines, storage, processing, and transportation facilities. Despite the volatility of oil and natural gas companies, Enterprise’s business model is relatively stable, charging customers fees for the use of its assets.
Robust Cash Flows and a Strong Balance Sheet
Enterprise’s cash flows tend to be robust, regardless of oil prices. This has enabled the company to increase its distribution every year for 26 consecutive years. With an investment-grade rated balance sheet and distributable cash flow covering the distribution by a strong 1.7 times, Enterprise is a very reliable income stock. While growth opportunities in the midstream space may be limited, Enterprise’s attractive 6.6% yield makes it an attractive option for dividend investors.
United Parcel Service: A Dividend Growth Opportunity
United Parcel Service (NYSE: UPS) offers a different value proposition, with higher dividend growth but a lower yield. Over the past decade, UPS has increased its dividend at a compound annual rate of nearly 10%, significantly faster than inflation. The company’s 4.8% yield is near the high end of its historical yield range, suggesting that the stock is currently undervalued.
A Turnaround Story with Strong Fundamentals
UPS is working to improve its business, with year-over-year increases in revenues and operating margin in the third quarter of 2024. While there is still more work to be done, management appears to be heading in the right direction. As one of the largest package delivery companies, UPS has a strong competitive advantage, and online shopping growth is likely to drive demand for its services.
Two Attractive Options for Dividend Investors
Both Enterprise Products Partners and United Parcel Service offer attractive features and yields that investors can count on for years to come. Enterprise is ideal for investors seeking high-yield fare, while UPS is a dividend growth stock with a strong turnaround story. With $500, $5,000, or even $5 million, these two stocks are worth considering for any dividend investor.
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