Conventional wisdom suggests that stocks with ultrahigh dividend yields come with greater risks. Many investors worry that these dividends might not be sustainable. While such concerns can be valid, they don’t always hold true.
For income-focused investors looking for reliable returns, there are excellent companies offering substantial dividends. Here are three ultrahigh-yield dividend stocks worth considering right now.
1. Enbridge
Enbridge (ENB 1.38%) boasts an appealing forward dividend yield of 6.06% and has consistently raised its dividends for 30 years. I believe there’s little risk of that streak ending soon.
The reason for my confidence in Enbridge lies in its robust business operations. Approximately 30% of crude oil produced in North America and 40% of U.S. crude oil imports are transported through its pipelines. Enbridge also transports about one-fifth of the natural gas consumed in the U.S. and is the largest natural gas utility by volume in North America.
Enbridge’s stability is impressive; over 98% of its EBITDA comes from regulated sources or take-or-pay contracts, ensuring consistent income for the company. Furthermore, around 80% of its EBITDA is immune to inflation pressures. This energy infrastructure company maintains steady cash flows and a strong balance sheet, expecting to grow its business by roughly 5% annually through the end of the decade, making it an ideal choice for income investors.
2. Enterprise Products Partners
Enterprise Products Partners (EPD 0.55%) offers similar advantages to Enbridge, but with a higher forward distribution yield of 7%. While it hasn’t matched Enbridge’s impressive 30-year dividend increase streak, it has consistently raised distributions for 26 years.
Though its operations are slightly less diversified than Enbridge’s, with an emphasis on natural gas liquids (NGLs), I believe it remains a reliable investment. Historical performance supports this, as Enterprise has maintained cash flow through various economic challenges, including the Great Recession and the COVID-19 pandemic.
With the demand for U.S. natural gas, NGLs, and oil expected to rise in the coming years, Enterprise Products Partners is well-positioned with its extensive pipeline network and $7.6 billion in capital projects currently underway.
3. Prudential Financial
Shifting to the financial sector, Prudential Financial (PRU 2.13%) represents another compelling ultrahigh-yield dividend stock to consider. Offering a forward dividend yield of 5.29%, Prudential has raised its dividend for 17 consecutive years.
While known primarily for its insurance operations, Prudential is also significant in the retirement sector, and its PGIM unit is a successful global investment management business. This mix helps diversify its revenue streams and reduces overall business risk by lessening reliance on traditional annuities and guaranteed life products.
Despite recent poor stock performance, this has actually improved Prudential’s valuation, with shares currently trading at a forward price-to-earnings ratio of 7.94. Their long-standing slogan, “Get a piece of the rock,” offers good advice for income investors looking for high dividends.
Keith Speights has positions in Enbridge, Enterprise Products Partners, and Prudential Financial. The Motley Fool holds positions in and recommends Enbridge and Enterprise Products Partners. The Motley Fool has a disclosure policy.
