Top Energy Stocks to Buy and Hold for Lasting Gains

A new administration has taken office in Washington, D.C., and its immediate strategy for the energy sector aims to swiftly reduce energy costs for consumers. However, investors focused on long-term income should be cautious about investing in companies that may only see short-term benefits due to potentially temporary government policies. It’s essential to consider firms that are resilient enough to adapt to various challenges and remain successful over the coming decades.

For investors looking to buy energy stocks with reliable dividends for the long haul, names like Chevron (CVX 1.98%), Enterprise Products Partners (EPD 0.56%), and Brookfield Renewable (BEP 0.73%) (BEPC 0.97%) should be on your radar. These high-yield energy stocks have unique qualities that enable them to endure and flourish in any energy market condition.

Chevron’s Strong Foundation

While falling energy prices could negatively impact Chevron—due to its significant involvement in upstream operations—the company is integrated across the midstream and downstream sectors, which helps mitigate the effects of low energy prices. This diversified operational structure provides Chevron with a solid foundation.

In addition to its diversified portfolio, Chevron boasts a robust balance sheet, with a low debt-to-equity ratio of 0.16x. This conservative leverage allows the company to take on debt during challenging times, ensuring ongoing investments in its business and consistent dividend payments. Chevron has raised its dividend annually for an impressive 37 years. Once energy markets recover, the firm can focus on reducing its debt.

Enterprise Products Partners and Fee-Driven Stability

In contrast to the commodity-driven upstream and downstream sectors, Enterprise Products Partners operates in the midstream sector, which is primarily fee-based. This company owns critical energy infrastructure, particularly pipelines, that transports oil and natural gas globally. Thus, while commodity prices fluctuate, Enterprise focuses on the volume of goods transported, which tends to remain stable regardless of market conditions. Their current distribution yield sits at an attractive 6.3%.

Furthermore, Enterprise has an investment-grade balance sheet, with its distributable cash flow covering distributions by 1.7x, providing ample protection against potential downturns. This North American midstream leader has also increased its distribution annually for 26 consecutive years, making it an appealing alternative for those seeking energy exposure without the risks associated with commodity prices.

Brookfield Renewable: A Shift in Energy Focus

Unlike Chevron and Enterprise, which are linked to oil and gas, Brookfield Renewable is focused on the renewable energy sector. As the global demand for clean energy continues to increase, Brookfield stands to benefit significantly. It offers a compelling 6.5% yield on its partner units and 5.2% on its corporate class shares. Brookfield Renewable reported record results, with a 10% increase in funds from operations in 2024, reinforcing its strong position in the market.

The company has a robust pipeline of growth opportunities and has recently increased its distribution by 5%. This agile approach allows it to capitalize on a unique market environment where mature clean energy assets demand favorable pricing for sellers, enabling Brookfield to either raise capital or acquire assets at advantageous prices.

Long-Term Thinking for Dividend Safety

For those building a dividend portfolio aimed at covering retirement expenses, focusing on the next few years should not be the priority. Instead, it’s crucial to identify companies that can withstand market fluctuations and continue to provide dividends consistently over the decades. Currently, Chevron, Enterprise, and Brookfield Renewable represent strong contenders, balancing dividend income with risk suitable for any discerning dividend investor.