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

Key Points

• The energy sector is going through a transition that will likely take decades.

• TotalEnergies is using its oil profits to fund its clean energy investments.

• Enbridge is focused on providing both carbon-based and clean energy.

• 10 stocks we like better than Enbridge ›

There are short-term gyrations that will always be present in the energy sector, given the volatile nature of oil and natural gas prices. And then there are longer-term trends that can be seen as a headwind or an opportunity.

I prefer to see the silver lining on the clean energy cloud by owning high-yield energy stocks TotalEnergies (NYSE: TTE) and Enbridge (NYSE: ENB). Here's why you might want to buy them, too.

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TotalEnergies is an integrated giant

TotalEnergies competes with energy giants ExxonMobil, Chevron, Shell, and BP. They all have the same basic business model, which entails owning assets across the energy value chain, from production (upstream) to transportation (midstream) and on to chemicals and refining (downstream). This diversification helps to soften the peaks and valleys that come from volatile energy prices.

Image source: Getty Images.

The big point of differentiation between TotalEnergies and its closest peers is that the French energy giant has made a strong commitment to investing in electricity and clean energy. Exxon and Chevron have basically chosen to stick with their core. Shell and BP both announced plans to invest in clean energy, but have since walked those plans back. TotalEnergies, if anything, has increased the pace of its investment. And, notably, it maintained its dividend when it announced its clean energy push while Shell and BP both cut their dividends when they made the same announcements.

This is still only a relatively small part of TotalEnergies' business, at roughly 10% of adjusted operating income from the company's business segments in 2024. That was up 17% from 2023 and the only segment that saw an increase, highlighting the diversification value this business offers.

That said, this is not a short-term play. TotalEnergies is looking at the long-term shifts in the industry and preparing now for a future that includes dramatically more electricity. Just as one example, the U.S. is expected to see electricity increase from 21% of end energy use in 2020 to 32% by 2050. That's a huge change and one that is likely to be seen the world over. Add in TotalEnergies' lofty 6.3% dividend yield and I'm a happy shareholder. (U.S. investors have to pay French taxes on the dividend, but can claim some of that back come tax time.)

Enbridge's fee-based business has a clean energy twist

TotalEnergies provides me with direct exposure to oil and natural gas. Canadian midstream giant Enbridge is more about a boring and consistent energy-adjacent dividend. The lofty 6% or so dividend yield is backed by the company's portfolio of fee-generating energy infrastructure assets. The largest contributions come from Enbridge's oil and natural gas pipelines, which is perfectly fine by me. These carbon fuels will likely be needed for decades to come.

That said, Enbridge has been increasingly investing in clean energy and regulated natural gas utilities. Together these businesses represent about a quarter of the company's earnings before interest, taxes, depreciation, and amortization (EBITDA). But they keep the company moving in the same direction as the world around it on the energy front.

The most notable thing here, however, is that Enbridge's natural gas utility and clean energy businesses are also consistent producers of cash flow. Regulation is the reason for that within the natural gas utility operation while long-term supply contracts are the core support in the clean energy segment. And so, Enbridge is changing with the world while continuing to hue to its own focus on generating reliable cash flows.

I'm letting others do the work for me

I don't really know which clean energy technology is going to be the big winner. Nor do I know the time frame for the energy transition. So I've chosen to invest in two "old" energy stalwarts that provide me with generous dividends and that are preparing today for a future that will include more clean energy. That way I can just collect the dividends while I leave the hard work of figuring out the clean energy transition up to TotalEnergies and Enbridge.

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