Key Points
Enbridge is a hybrid energy/utilities stock with a stable, relatively low-risk business model.
Enterprise Products Partners ranks among the most dependable passive-income machines in the energy sector.
Chevron boasts an impressive record of 39 consecutive dividend increases.
Income investors have several go-to sectors. Utilities are perennially popular. REITs are attractive to investors looking for especially juicy yields. But the energy sector is another source of dependable, inflation-resistant income.
Energy demand holds up well through most market cycles, even recessions. Midstream energy companies and integrated oil and gas companies, in particular, stand out for their ability to generate stable cash flow.
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Do you want decades of passive income? Here are three energy stocks to buy right now.
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1. Enbridge
Enbridge(NYSE: ENB) is a Calgary, Alberta-based company that owns a massive pipeline network. Its pipelines transport roughly 30% of the crude oil produced in North America and one-fifth of the natural gas consumed in the U.S. In recent years, Enbridge has also invested heavily in renewable energy.
However, Enbridge isn't just an energy stock; it's also a utility stock. The company's acquisitions have catapulted it into the top spot among North American natural gas utilities by volume. Enbridge's natural gas business now serves 7.1 million customers.
The midstream/utility leader recently increased its dividend by 3%. This marked Enbridge's 31st consecutive year of dividend hikes. The company's forward dividend yield of 5.4% is sure to catch the eye of many income investors.
Enbridge's business model is stable and relatively low risk. The company's management team is also trustworthy, achieving financial guidance for an impressive 20 consecutive years. As a bonus, Enbridge has visible growth through the end of the decade, with around $50 billion of opportunities identified over the next four years.
2. Enterprise Products Partners
Enterprise Products Partners(NYSE: EPD) is another midstream leader that income investors should like. This master limited partnership (MLP) owns over 50,000 miles of pipeline, more than 300 million barrels of liquids storage, 45 natural gas processing trains, 27 fractionators, and 21 deepwater docks.
Around 55% of Enterprise Products Partners' gross operating margin stems from natural gas liquids (NGLs). The rest of the company's margin is split roughly equally between its crude oil, natural gas, and petrochemical operations.
Enterprise Products Partners ranks among the most dependable passive-income machines in the energy sector, having increased its distribution for 27 consecutive years. It also offers one of the most lucrative distributions, with a yield currently topping 5.8%.
This pipeline stock is as stable as they come. Enterprise Products Partners is the only midstream energy infrastructure company with an A- credit rating (indicating low risk). Around 90% of Enterprise's long-term contracts are inflation-resistant due to escalation provisions. The MLP also has solid growth prospects, driven in part by surging demand for natural gas-fired power plants to supply electricity to data centers.
3. Chevron
Investors seeking passive income don't have to limit themselves to the midstream part of the energy sector. Chevron(NYSE: CVX) is an integrated energy major that ranks as the world's third-largest energy company by market cap.
Chevron's upstream operations have the highest margins in the industry. The company is the global leader in natural gas production. It boasts the largest retail market share. Chevron's U.S. refining net cash margin also leads the industry.
Few energy companies come with a more impressive dividend track record than Chevron. The oil and gas giant has increased its dividend for 39 consecutive years. Its forward dividend yield of 3.8% is well below Chevron's average yield over the last 10 years, though, because its stock has performed so well.
Chevron is built to last, with its roots dating back to 1879. The company is also poised for solid growth. Management expects Chevron's earnings per share to increase by an average of at least 10% per year.
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Keith Speights has positions in Chevron, Enbridge, and Enterprise Products Partners. The Motley Fool has positions in and recommends Chevron and Enbridge. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
