Two High-Yield Dividend Shares to Purchase and Hang onto for a Ten-Year Span
The S&P 500 index (-1.26%) is only providing a meager 1.2% return. On the other hand, the 6.3% return offered by Enbridge (-0.26%) and the 6.4% from Enterprise Products Partners (-0.25%) are quite substantial! However, there are more reasons to favor these two North American midstream giants than just their impressive yields.
Here's why you can comfortably invest in and hold onto these high-yield stocks for a decade or more.
Being positioned in the middle works well for Enterprise and Enbridge
Both Enterprise and Enbridge operate in the midstream segment of the wider energy sector. Essentially, they invest in large and costly assets such as pipelines, storage terminals, transportation hubs, and processing plants. They then rent out these essential energy assets to upstream (energy production) and downstream (chemicals and refining) entities for their use.
What sets the midstream apart from the upstream and downstream is that customers usually pay fees for the use of these assets, and commodity prices play a minor role in the revenues for either of these midstream giants. Demand for their services is what truly matters, and even during energy crises, demand for oil and natural gas typically remains steady. These two fuel sources are essential to economic activity, irrespective of the market price.
One argument against this is that renewable energy is set to replace fossil fuels in the long term. It's quite possible, but this transition won't happen overnight. It's expected to take at least a decade to complete. Moreover, even dirtier alternatives like coal and biomass are still important energy sources around the world despite the availability of better options, like oil and natural gas.
It's still unclear whether clean energy will replace anything, especially if energy demand continues to rise. An "all of the above" strategy might end up being the most effective approach. This would mean that the demand for Enterprise and Enbridge's essential energy services might remain strong for decades to come.
Enterprise and Enbridge: Stable and dependable
There's no particular reason to doubt the core business operations of these two midstream companies. However, why these two? For starters, they have consistently demonstrated their reliability as income-generating stocks. Enterprise has boosted its distribution for 26 consecutive years, while Enbridge has increased its dividend (in Canadian currency) for 30 years in a row. It's clear that both companies prioritize rewarding investors with a dependable and growing income stream.
Furthermore, their financial health is robust. Enterprise Products Partners has an investment-grade rated balance sheet, and so does Enbridge. Enterprise's distributable cash flow comfortably covers its distribution by a strong 1.7 times, while Enbridge is projecting that its distributable cash flow payout ratio will remain within its 60% to 70% target range. Neither of these companies appears to be at risk of reducing their dividends.
It's true that the yields of both investments will likely account for the majority of returns over time. However, acquisitions and ongoing capital investment programs will allow both businesses to continue growing over time. Enbridge has a $20 billion capital investment plan in place that will last through 2029, and Enterprise has $7 billion worth of growth projects currently underway.
Enbridge and Enterprise have distinct characteristics
If you're considering investing in one of these two highly appealing income stocks, there are some key differences to consider. Enterprise is a master limited partnership (MLP), which can make tax filing more complex. Enbridge, on the other hand, has exposure to natural gas utilities and clean energy assets, giving it a more diversified asset portfolio. Neither of these distinctions is likely to make or break the appeal of these two high-yield investments, but individual investors might prefer one over the other. Regardless of your choice, you can expect to receive substantial dividend payouts for years to come.
Given the text, here are two sentences that contain the words 'investing', 'money', and 'finance':
Investors considering 'investing' in Enterprise Products Partners or Enbridge can rely on their robust financial health and reliable income-generating status, as evident by their consistent dividend increases over several decades. With the steady demand for their essential energy services and substantial dividend payouts, these companies offer a promising opportunity for 'money' growth through 'finance' investments.
