The energy sector is associated with commodity-driven price volatility. However, many energy companies, especially those engaged in the transportation, processing, and storage of oil (CBH25), gas (NGG25), and related products, are popular for consistently rewarding their shareholders with steady dividends and high yields.
Thanks to long-term contractual agreements, these energy companies are well-positioned to mitigate price and volume risks. Many of these contracts include minimum volume commitments and other risk-reducing mechanisms that ensure consistent cash flow generation. This stability enables these firms to maintain a strong track record of dividend payouts, even during periods of market turbulence.
Among the top dividend-paying energy stocks, Enterprise Products Partners (EPD) and Energy Transfer (ET) stand out for their consistent dividend payments and growth. These energy infrastructure companies offer attractive dividend yields exceeding 6%. Additionally, Wall Street remains optimistic about their future growth, making them compelling options for income-focused investors.
Energy Stock #1: Enterprise Products
Enterprise Products (EPD) is a compelling stock in the energy sector that will likely generate steady dividend income in 2025. The company provides midstream energy services, delivering essential services that connect energy producers with consumers. Through its extensive network of pipelines and facilities, Enterprise handles the gathering, processing, transportation, and storage of oil, natural gas, and natural gas liquids (NGLs).
The energy infrastructure company benefits from the steady demand for its services. This stability is further bolstered by the company's strategic approach to inflation and cost management. Approximately 90% of its long-term contracts include escalation clauses, ensuring cash flows and distributions remain protected from inflationary pressures.
Additionally, higher commodity prices positively influence the company’s revenues, driving increased throughput and demand for its services. Further, to manage rising costs, Enterprise Products employs strategies such as fixed-price agreements and financial derivatives.
Enterprise Products’ ability to generate reliable cash flow has translated into a remarkable 27-year streak of consecutive dividend increases. In its most recent quarter, the company reported distributable cash flow (DCF) of $2 billion, marking a 5% year-over-year increase. With a distribution coverage ratio of 1.7 times, Enterprise ensures steady payouts and retains ample cash to reinvest in growth opportunities.
The company’s growth prospects remain robust, driven by higher utilization of its midstream assets and strategic acquisitions. These factors are expected to further enhance DCF, supporting continued dividend growth and shareholder returns.
Enterprise Products stock has a “Strong Buy” consensus rating. Moreover, it offers a high yield of 6.6% near the current market price.
Its resilient business model, growing cash flows, high yield, and analysts’ bullish outlook make Enterprise Products an attractive income stock for 2025.
Energy Stock #2: Energy Transfer
Energy Transfer stock is another compelling investment for investors seeking worry-free dividend income in 2025 and beyond. The energy infrastructure company is known for consistently paying and increasing dividends and offering a high and sustainable yield.
Energy Transfer, which transports and stores oil, natural gas, and related products, operates one of the largest interstate pipeline systems in the U.S. This extensive network connects top trading hubs and industrial regions, resulting in high asset utilization and steady income.
Energy Transfer benefits from its well-diversified asset base. Further, about 90% of its earnings are derived from stable, fee-based contracts, ensuring a reliable income regardless of market fluctuations. The remaining 10% of earnings comes from exposure to commodity prices and spreads, adding a layer of diversification to its revenue model.
Looking ahead, Energy Transfer is well-positioned to enhance shareholder value through increasing dividend distributions, projected to grow at an annual rate of 3%-5%. These increases are supported by the company’s strong cash flow generation. Furthermore, Energy Transfer remains focused on reducing its debt burden and expanding share buyback initiatives, ensuring additional returns to shareholders.
Notably, significant insider ownership underscores management’s confidence in the company’s future. Wall Street analysts echo this sentiment, maintaining a “Strong Buy” consensus rating for the stock.
With a high dividend yield of 6.57% and a track record of reliable payouts, Energy Transfer is a high-quality dividend stock for income-focused investors in 2025.
