2 No-Brainer Dividend Stocks to Buy Right Now
Key Points
One of these picks provides important services to these businesses and to other clientele.
The other is an appealing mix of traditional power and green energy assets.
The war with Iran has, for obvious reasons, made the broader U.S. energy sector rather volatile lately. Shares of companies that extract, produce, and sell oil have risen as sharply as that commodity's per-barrel price. Already, however, it seems that the combatants are looking for off-ramps, so this "war premium" might not be sustainable.
With that in mind, here's a look at two sector companies that have flown a bit under the radar compared to their black gold peers. What's more, both offer generous dividend payouts for their shareholders. Here, then, is a brief rundown of Enterprise Products Partners (NYSE: EPD) and NextEra Energy (NYSE: NEE).
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1. Enterprise Products Partners
Look at Enterprise as something of a middleman. Through its vast (over 50,000-mile) pipeline network spanning 27 American states, the company is a major transporter of crude oil and other valuable liquids across this country.
In contrast to many of its clients, whose fortunes can rise and fall with that of their chosen commodity, Enterprise charges flat fees for its services. The secret sauce is that there are many fees the company can levy, as it's a vertically integrated operator that's also a gatekeeper with its transportation-adjacent activities, such as processing, storage, and exporting.
With this continuously revenue-earning operation, Enterprise -- structured as a master limited partnership (MLP) -- runs a comfortably profitable business. In its most recently reported quarter, the company took in nearly $13.8 billion in revenue, filtering down into net income that wasn't far below $1.7 billion.
With a double-digit profit margin like that, Enterprise generates sufficient cash to fund what's essentially a high-yield dividend (strictly speaking, MLPs pay "distributions"). These days, the company pays a quarterly distribution of $0.55 per unit, shaking out to a yield of 5.6%.
With its vertical integration and relatively broad customer base comprising upstream oil companies, refiners, and chemical producers, among others, Enterprise is also well hedged against slowdowns in those individual client segments. Meanwhile, its extensive fee structure generates revenue from a wide range of services. That, to me, makes for a business with a very solid foundation that can sustain its high-yield payout, and a fine stock to own.
2. NextEra Energy
NextEra is essentially a legacy electricity provider combined with a 21st-century energy business focused on renewable generation assets and nuclear power.
What's appealing about this mix is that it gives NextEra a rather stable, traditional legacy electricity business, combined with "greener" generating capabilities in high demand. Despite the Trump administration's clear distaste for renewables, these forms of energy generation remain the wave of the future for this world.
One clean power generation method the administration does favor is nuclear, and NextEra is an important player in that segment. Its nuclear assets are split between its two business units. All together, they make for a relatively large nuclear "fleet" in this country, with the company boasting full (or at least majority) ownership stakes in eight reactors across five states.
All but one of these reactors are currently in operation. That exception, Duane Arnold in Iowa, is in an active recommissioning phase, with NextEra teaming with Alphabet's Google to bring it back onstream. The target restart for the unit is the first quarter of 2029. When the switch is thrown, it'll mainly supply power for Google's artificial intelligence (AI) data centers under a 25-year supply agreement.
Over the past three years, NextEra's managed to steadily grow its revenue, while posting admirably high net margins ranging from almost 26% to 32%. That gives it sufficient financial power (sorry) to pay a regular dividend, which in February was raised by a meaty 10% to slightly over $0.62 per share. It currently yields 2.7%.
Should you buy stock in Enterprise Products Partners right now?
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and NextEra Energy. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
