Here Are My Top 2 High-Yield Energy Stocks to Buy Now

As a dividend investor, I appreciate a high-yield stock with a rock solid business behind it. One of my biggest preferences, however, is for simplicity. It's hard enough tracking a portfolio of stocks -- why gum up the process with overly complex investments? That's why I am a big fan of Black Hills (NYSE: BKH) and TotalEnergies (NYSE: TTE) today.

Bad stories are all over the place

When it comes to dividend stocks, you can find high yields fairly easily. For example, master limited partnership (MLP) Energy Transfer has a huge 7.7% distribution yield. However, this midstream giant cut its dividend in 2020, right when investors probably would have preferred a reliable income stream thanks to the coronavirus pandemic. And in 2016, it scuttled a deal to buy peer Williams that Energy Transfer itself had initiated. In the process, it made some moves that suggested that the MLP was looking out for insiders rather than worrying about unitholders. That's a terrible backdrop and not something I want to get involved in.

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Then there's integrated energy company BP, with a well-above-industry-average 6.4% dividend yield. Only BP made a bold shift toward clean energy in 2020, a move that coincided with a dividend cut. Presumably, the dividend cut would have freed up capital to put toward clean energy. But BP has since walked back its clean energy commitment. It seems like management doesn't have a full grasp of what it's doing. Now, there are rumors that BP might get bought out by a rival. BP's business gyrations are too complicated for me to bother with.

2 high yielders I own and love

In contrast to those two stocks, I happily own Black Hills and TotalEnergies. They have dividend yields of 4.6% and 6.7%, respectively. Black Hills is a utility, a segment where the average yield is 2.9%, and TotalEnergies is an integrated energy producer, where the average energy stock's yield is around 3.5%. So both are offering well-above-average yields.

Black Hills is, by far, the more boring of the pair. It operates regulated natural gas and electric utilities serving roughly 1.35 million customers across parts of Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. There's really nothing particularly exciting about the business -- it's a slow and steady tortoise. But it's also a very reliable tortoise, with over 50 years of annual dividend increases behind it. That makes it one of the few utilities to achieve Dividend King status.

You may not have heard of Black Hills because it's fairly small, with a market cap of around $4.5 billion. Don't ignore it because of its size. The utility's customer base is growing at nearly three times the rate of the U.S. population, and management believes it can achieve 4% to 6% annual earnings growth for the foreseeable future. Dividends should track earnings higher over time.

TotalEnergies isn't small -- it's one of the largest integrated energy companies in the world. It actually competes with BP directly, and it owns pipelines and other midstream assets just like Energy Transfer. But the big draw here is likely to be the lofty yield. That's just the start of the story.

TotalEnergies made the same clean energy commitment at the same time as BP and Shell. But unlike BP and Shell, TotalEnergies didn't cut its dividend when it made the commitment, and it hasn't walked back its clean energy commitment like BP and Shell have since done.

Basically, TotalEnergies is a giant oil and gas company that's using its carbon fuel profits to grow a business unit that's focused on cleaner alternatives. I like the hedge that offers me, given the ongoing changes the world is making on the clean energy front. The high yield and support of the dividend through this transition period are icing on the cake.

The story matters if you want to sleep well at night

Some investors might prefer BP and Energy Transfer over Black Hills and TotalEnergies. That's fine for them, but I prefer to own companies I can easily understand, that reward me well for owning them (with reliable dividends), and that don't have troubling histories that leave me wondering if I can trust management. Black Hills and TotalEnergies are two of my favorite high-yield energy buys right now.

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Reuben Gregg Brewer has positions in Black Hills and TotalEnergies. The Motley Fool recommends BP. The Motley Fool has a disclosure policy.