Energy Transfer's fee-based pipeline model and about a 7% yield make it the safest high-yield pick of the three.
Clearway Energy pairs a strong yield with AI-driven power demand, giving it the group's greatest upside potential.
International Paper offers a healthy yield and exposure to one of the world's largest forestry and paper companies.
Stocks with dividend yields over 5% aren't automatically good investments, especially if the investor expects to hold them over the next five years. A high yield can signal risk, and investors might see both their dividend and capital shrinking day by day if they make a bad choice.
But when strong Wall Street approval backs a high yield, the framing changes. These companies offer both substantial income and strong potential for capital appreciation, a combination that should make long-term investors happy.
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So let's look at three companies that embody both high yields and strong analyst scores and why they deserve a spot in their portfolio.
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Energy Transfer (NYSE: ET) is a midstream energy infrastructure company, meaning it owns and operates pipelines, storage facilities, and processing plants that move energy from power producers to refiners and distributors. One benefit of a midstream company is that it's largely immune to the ebb and flow of commodity prices.
In this case, Energy Transfer earns roughly 90% of its revenue from fees. And out of that, the company pays a $1.36 forward annual dividend, or about a 7% yield.
Wall Street is quite bullish on Energy Transfer. A consensus among 20 analysts rates the stock a "strong buy," with a $28 high price target suggesting nearly 39% upside. That kind of bullish backdrop makes Energy Transfer a strong income anchor, but it's not the only high-yield name with extra upside built in.
Clearway Energy (NYSE: CWEN), on the other hand, owns and operates a portfolio of renewable energy and power generation assets, sitting on the opposite end of the energy spectrum from Energy Transfer. It's not a consumer-facing business either, which is probably why some investors have never heard of it. Instead, the company sells its electricity under long-term power purchase agreements (PPAs) with utilities and large corporations.
In this context, "large corporations" refers to artificial intelligence hyperscalers such as Alphabet, Microsoft, and another unnamed but "prominent hyperscaler." That's a clear pathway to AI growth, and analysts are starting to notice. The stock has a solid "strong buy" rating based on a consensus among 12 analysts, while a $58 high target price represents a 95% potential upside if reached.
Of course, the stock also pays a $1.90 forward annual dividend, which translates to about a 7% yield at today's prices. That combination of income, growth, and analyst support makes Clearway Energy a compelling pick.
The last name on this list has nothing to do with the energy sector at all, which only adds to its appeal. International Paper Company (NYSE: IP) makes fiber-based packaging, mainly corrugated boxes and the containerboard used to make them.
Its main business, industrial packaging, produces fiber-based packaging that protects goods and facilitates worldwide commerce. In fact, it's one of the world's largest forestry and paper companies, with a strong presence in Europe thanks to its acquisition of DS Smith.
More importantly for income investors, the company pays a $1.85 forward annual dividend, which translates to about a 5% yield. But of course, the good news doesn't stop there. Wall Street rates International Paper a "strong buy" based on 13 analyst ratings, with a $62 price target implying 77% potential upside if reached.
With all three offering something different, the real question is which one fits an investor's particular goals. All three provide steady cash flow, real Wall Street backing, and high upside potential, making them ideal choices for those looking to hold high-yield stocks over the next five years.
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Rick Orford has positions in Alphabet and Microsoft. The Motley Fool has positions in and recommends Alphabet and Microsoft. The Motley Fool recommends International Paper. The Motley Fool has a disclosure policy.