Do you need reliable passive investment income? Dividend stocks are arguably your best bet. Although you can do pretty well with bonds, too, most high-quality, higher-yield dividend stocks regularly raise their payouts. Bonds don’t.
And if you’re looking for a great one to own right now, consider buying a piece of oil and gas pipeline operator Energy Transfer (ET +0.32%) while its forward-looking dividend yield is right at 7%. A $42,500 purchase of 2,239 shares will generate $3,000 in annual — and growing — dividend income.
Image source: Getty Images.
An ideal business model for generating dividends
It may be in the energy business. Unlike more familiar energy names like Chevron and ExxonMobil, though, its bottom line isn’t tethered to the ever-changing price of oil.
Rather, with access to a network of 140,000 miles’ worth of pipelines spanning much of the United States, Energy Transfer’s business is simply getting natural gas and crude oil from point A to point B, regardless of the price of what’s being pushed through those pipes. The company is only concerned with oil consumption rates, since it effectively operates a tollbooth that generates recurring revenue. This, of course, is an ideal business model for supporting dividends.
Today’s Change
(0.32%) $0.06
Current Price
$19.12
Key Data Points
Market Cap
$66B
Day’s Range
$18.93 – $19.23
52wk Range
$16.18 – $20.70
Volume
22.6K
Avg Vol
13.5M
Gross Margin
11.57%
Dividend Yield
6.98%
To this end, recent data from the U.S. Energy Information Administration indicate that consumption of gas and oil hasn’t slowed down at all this year despite higher prices for both. This persistent consumption is also the chief reason the company’s now been able to raise its per-share payment for five consecutive years … every year since the wind-down of the COVID-19 pandemic.
Maybe not for everyone
There is one key consideration. That is, Energy Transfer is technically organized as a master limited partnership (MLP), which has specific tax-filing requirements. Partnerships are not terribly complicated. But if you’re doing your own taxes and aren’t familiar with tax forms unique to these entities, this ticker may be more trouble than it’s worth.
Or maybe it’s worth learning how to handle their tax filing requirements.
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.
