Want Safe Dividend Income in 2025 and Beyond? Invest in the Following 2 Ultra-High-Yield Stocks.

Source Motley_fool

Key Points

  • Enbridge has expansion projects lined up through 2029.

  • Clearway Energy has visible growth through 2027.

  • These companies should have plenty of power to continue increasing their high-yielding dividends in the coming years.

  • 10 stocks we like better than Enbridge ›

Not all high-yielding dividend stocks are high-risk investments. Some companies back their big-time payouts with very stable cash flows and conservative financial profiles. As a result, they can offer investors sustainable, steadily growing income streams.

Enbridge (NYSE: ENB) and Clearway Energy (NYSE: CWEN.A)(NYSE: CWEN) exemplify this rare combination of yield and safety. These companies can deliver bankable dividend income that will continue well beyond 2025.

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Visible growth through the end of the decade

Enbridge offers a 5.5% dividend yield, much higher than the S&P 500's 1.2%. The Canadian pipeline and utility company supports this payout with stable, predictable cash flow, as cost-of-service agreements and long-term contracts account for 98% of its earnings. As evidence of its earnings predictability, Enbridge has achieved its annual financial guidance for 19 straight years despite two major recessions and multiple other periods of turmoil in the energy sector.

The energy company aims to distribute between 60% and 70% of its stable cash flow as dividends. That enables it to retain billions of dollars each year to fund expansion projects. Enbridge also has a strong balance sheet, with its leverage ratio trending toward the lower half of its target range of 4.5 to 5.0 times. This provides it with additional financial capacity to fund new investments.

Enbridge has a multibillion-dollar backlog of growth capital projects, including oil pipeline expansions, new gas pipelines, gas utility projects, and renewable energy developments. These projects will enter commercial service by 2029, providing Enbridge with clear growth visibility.

The company currently expects to grow its distributable cash flow per share by around a 3% compound annual rate through 2026. It anticipates growth accelerating to around 5% annually after 2026. As a result, Enbridge expects to increase its dividend by up to 3% annually through next year and by as much as 5% per year after that. This would extend Enbridge's dividend growth streak, which is currently at 30 straight years.

Growth visibility through 2027, with ample power to continue growing

Clearway Energy's dividend currently yields 6.3%. The company backs its dividend with one of the largest clean-power fleets in the country. It sells the electricity generated by its wind, solar, and natural gas facilities to utilities and large corporations under long-term, fixed-rate power purchase agreements (PPAs). Those PPAs generate very stable cash flow to support Clearway's high-yielding dividend.

The clean-power company currently expects to generate $2.08 per share of cash available for dividends (CAFD) this year, more than enough to cover its annualized dividend level of $1.78 per share. That enables Clearway to retain excess free cash flow to invest in more income-generating renewable energy assets.

Clearway currently has several renewable energy investments lined up that should start contributing to its cash flow as they begin commercial service over the next two years. By 2027, Clearway expects to produce between $2.50 and $2.70 of CAFD per share, a more than 20% increase. This supports its plans to increase its dividend to around $1.98 per share by 2027, representing an 11% rise from the current level.

The company is already looking to extend its growth well beyond 2027. Its growing post-dividend free cash flow and balance sheet strength give it the financial flexibility to continue investing in additional renewable energy assets.

It's pursuing multiple investment opportunities, including repowering existing wind farms, adding battery storage to existing wind and solar facilities, acquiring newly developed wind projects from its parent company (renewable energy developer Clearway Energy Group) as they enter commercial service, and acquiring operating power plants. Those catalysts should power 5% to 8%+ annual CAFD per share growth beyond 2027, which could support dividend growth within that range.

Safe and growing dividend income

Enbridge and Clearway Energy produce stable, growing income, enabling them to pay safe, steadily rising dividends. Both companies have clear earnings and dividend growth ahead for the next few years, making them top choices for those seeking sustainable dividends.

Should you invest $1,000 in Enbridge right now?

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Matt DiLallo has positions in Clearway Energy and Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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