Countless people dream of being able to pay their bills with the cash they receive from their investments. But it doesn’t have to be just a fantasy. There are smart moves you can make right now to start earning more passive income. Investing in high-quality dividend stocks is one such move. Well-chosen, high-yield stocks can deliver reliable cash payouts to their shareholders year after year.
To help you in your search for the best income-generators, here are three stocks that are particularly enticing buys today.
Enterprise Products Partners
The war in Ukraine, and the corresponding disruptions to the global energy markets, made clear how crucial it is to have dependable and economical power sources. Enterprise Products Partners (EPD -0.42%) is helping to meet this vital need by supplying its customers with the energy they require.
Enterprise possesses a vast network of pipelines, storage sites, processing facilities, and deepwater docks. This valuable collection of assets helps to transport oil, natural gas, liquified natural gas, and petrochemicals across the U.S.
Enterprise is highly profitable, with an average return on invested capital of 12% over the past decade. The master limited partnership (MLP) also excels at generating cash to pass on to its investors. Enterprise’s distributable cash flow climbed 17% to $7.8 billion in 2022. That allowed it to boost its well-covered cash distribution for the 24th straight year.
Following its latest increase, Enterprise’s partnership units currently offer income-seeking investors an attractive 7.4% yield.
Brookfield Infrastructure Partners
If you’d prefer an even broader collection of assets from which to draw passive income, check out Brookfield Infrastructure Partners (BIP -0.09%). Like Enterprise Products Partners, Brookfield helps to transport essential cargo, but it goes beyond energy to include people, freight, and data. Think toll roads, railroads, and telecom towers.
The revenue generated by these infrastructure assets is often locked in with long-term contracts. This helps to insulate Brookfield from economic downturns. These contracts also tend to include inflation adjustments, which are proving particularly valuable during the current rising interest rate environment. Together, these appealing aspects of Brookfield’s operating model enable it to produce robust cash flow in nearly all market conditions.
Brookfield is highly selective when it comes to the projects it invests in. It targets returns of 12% to 15% on the capital it deploys. Yet it’s proven to be up to the challenge; Brookfield has grown its funds from operations (FFO) by an 11% compound annual growth rate over the past decade. That allowed it to raise its cash distribution to investors by 9% annually during that time.
Brookfield believes it can continue to grow its payout by 5% to 9% annually in the coming years. And that’s in addition to the roughly 4% yield investors can earn by buying the infrastructure giant’s shares today.
AT&T (T 0.89%) is another company that specializes in delivering bountiful passive income to its shareholders. The wireless leader pays a hefty dividend that yields a solid 5.7%.
After an ill-fated, media empire-building spree failed to produce its intended gains, AT&T has refocused its efforts on its core telecommunications business. This prudent new strategy is paying off. AT&T is winning new wireless and broadband internet subscribers. Combined with the steps that management is taking to slash expenses, this customer growth is bolstering AT&T’s already ample cash-flow production.
In all, the telecom titan expects to generate at least $16 billion of free cash flow in 2023. Investors can rest easy with the knowledge that this should be enough cash for AT&T to cover its dividend payments more than two times over. The remaining free cash flow can be used for other value-creating purposes, such as debt reduction and share repurchases.
With increasing demand for high-speed connectivity services driving its subscriber growth, and its abundant cash flow providing multiple ways to boost returns to shareholders, AT&T is an excellent passive income-producing stock to buy today.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Infrastructure Partners and Enterprise Products Partners. The Motley Fool has a disclosure policy.