2 No-Brainer High-Yield Energy Stocks to Buy Right Now
Key Points
The energy sector's dividend yield is three times higher than the S&P 500's average.
Brookfield Renewable expects to grow its 3.8%-yielding dividend at a 5% to 9% annual rate.
Enbridge should boost its 5.8%-yielding payout by 3% to 5% each year.
- 10 stocks we like better than Brookfield Renewable ›
The energy sector currently has the second-highest dividend yield in the S&P 500 at 3.3%, three times the index's average of 1.1%. As a result, it's a great place to go shopping for high-yielding dividend stocks.
Here are two no-brainer energy stocks to buy for dividend income right now.
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Brookfield Renewable
Brookfield Renewable (NYSE: BEPC)(NYSE: BEP) is a leading global renewable energy producer. It sells most of the power it produces to utilities and large corporations under long-term, fixed-rate power purchase agreements (PPAs). It currently has 90% of its power under contract for an average term of 13 years. Most of its PPAs link power rates to inflation (70% of its revenue). As a result, Brookfield generates stable, steadily rising cash flow to support its 3.8%-yielding dividend.
In addition to inflation-linked rate increases, Brookfield's growth drivers include securing higher rates as legacy PPAs expire, investing in renewable energy development projects, and making acquisitions. Robust demand for renewable energy powers Brookfield's view that it can grow its funds from operations (FFO) at a more than 10% annual rate through 2030. That easily supports its plan to increase its dividend by 5% to 9% each year. Last year was the 14th consecutive year Brookfield hiked its payout by at least 5%.
Enbridge
Enbridge (NYSE: ENB) is one of North America's largest energy infrastructure operators. It owns a vast network of oil and gas pipelines, the largest gas utility franchise, and a growing renewable power business. Long-term, fixed-rate contracts and government-regulated rate structures underpin about 98% of the company's annual earnings. This stable cash flow supports the Canadian pipeline and utility company's 5.8%-yielding dividend.
The company's base operations produce stable and steadily rising earnings as volumes and rates increase. Meanwhile, Enbridge invests heavily in expanding its operations through organic expansion projects and acquisitions. The company currently has a multi-billion-dollar backlog of capital projects that should enter commercial service through the end of the decade. That backlog helps drive Enbridge's view that it can grow its cash flow per share at a 3% compound annual rate through this year before accelerating to around 5% annually in 2027 and beyond. That should support continued dividend increases within that 3% to 5% annual range. Enbridge delivered its 31st consecutive annual dividend increase in 2026, raising its payout by another 3%.
No-brainer buys for dividend income
Brookfield Renewable and Enbridge both pay high-yielding dividends that should continue growing in the coming years. That makes them ideal energy stocks to buy for passive income right now.
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Matt DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners, and Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
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