Two Straightforward High-Dividend Income Stocks with Expanding Dividends, Ideal for Purchase with a $500 Investment Now.
Two Straightforward High-Dividend Income Stocks with Expanding Dividends, Ideal for Purchase with a $500 Investment Now.
When investors focus on high-yield stocks, they frequently only consider the yield. However, this is a mistake as high yields might indicate a risky dividend. It's crucial to scrutinize the company responsible for the yield and, equally significantly, its dedication to maintaining the dividend in both favorable and unfavorable market conditions. At present, dividend investors might want to look into reliable income stocks like Enterprise Products Partners (EPD -0.83%) and United Parcel Service (UPS 1.31%). Here's why.
Enterprise has a 'steady as she goes' charm
Enterprise Products Partners is a master limited partnership (MLP) that operates in the midstream segment of the oil and natural gas industry. It owns critical infrastructure assets such as pipelines, storage, processing, and transportation facilities. Although oil and natural gas companies can be unpredictable, Enterprise essentially serves as a toll collector, charging customers fees for utilizing its assets. Due to the integral role of oil and natural gas in the global economy, demand for Enterprise's assets is generally robust in both favorable and unfavorable energy markets.
Simply put, Enterprise's cash flows are relatively steady, no matter the oil prices' situation. This allows the MLP to increase its distribution annually for 26 consecutive years, an impressive feat even in the often volatile energy sector. Additionally, Enterprise boasts an investment-grade rated balance sheet and distributable cash flow that comfortably covers the distribution by a strong 1.7 times. This results in a highly dependable income stock.
It's essential for investors to understand, however, that growth opportunities within the midstream space are relatively limited. Enterprise's attractive 6.6% yield typically makes up the majority of an investor's return. Nevertheless, as one of the largest midstream players in North America, Enterprise has a modest capital investment budget, which is likely to be supplemented by acquisitions. Distribution growth of around low to mid-single digits can be expected over time. This is an appealing combination for dividend investors looking to maximize their portfolio's income stream.
UPS offers growth with a twist
Slow and steady growth with a high yield is what you get with Enterprise. United Parcel Service, on the other hand, delivers higher dividend growth but a lower yield. To put it into numbers, UPS, commonly known by its initials, increased its dividend at a compound annual rate of almost 10% over the last decade. This is significantly faster than the historical growth rate of inflation, meaning UPS has materially increased the purchasing power of its dividend.
What makes UPS particularly exciting today is that its 4.8% yield is approaching the higher end of the stock's historical yield range. This suggests that the company is currently undervalued. Unfortunately, the business is not currently performing at its best. However, the third quarter of 2024 showed year-over-year improvements in revenues and operating margin, indicating that the company is turning things around. While more work is still necessary, it seems that management is guiding the company in the right direction.
The true appeal here is the business itself. UPS is one of a small number of large package delivery companies. Replicating what UPS offers would be challenging, if not impossible. Moreover, with online shopping continuing to grow, it seems likely that demand will continue to increase. If you're comfortable investing in a turnaround situation, UPS appears to be a dividend growth stock struggling to regain its footing but already starting to rebuild its reputation.
Two dependable dividend options for your immediate consideration
If you have $500, $5,000, or even $5 million and enjoy dividend stocks, you should take a closer look at Enterprise and UPS. One may be the better choice for investors seeking high-yield stocks, while the other may appeal to those focused on dividend growth. But both businesses offer attractive features and yields that should provide a steady income stream for years to come.
In the context of considering reliable income stocks for dividend investors, Enterprise Products Partners' (EPD) consistent distribution increases and robust demand for its assets make it a highly dependable income stock with a steady yield. On the other hand, United Parcel Service (UPS) offers higher dividend growth, approaching its historical yield range, and has shown signs of turning around its performance, making it an appealing option for investors comfortable with a turnaround situation.
Investors looking for high-yield stocks might find Enterprise's 6.6% yield appealing, while those focused on dividend growth may be drawn to UPS's significant historical dividend growth rate. Both stocks, with their attractive yields and features, could potentially provide a steady income stream for years to come.