2 Uncomplicated High-Yield Dividend Growth Stocks Worth Buying for $500 Right Now

When investors think about high-yield stocks, yield is often the only consideration that is considered. This is a mistake because sometimes a high yield is a sign of a risky dividend. That’s why you should also look into the company’s yield maintenance and, just as importantly, its willingness to maintain its dividend in good and bad markets. Right now, dividend investors should probably consider reliable income stocks like Enterprise Product Partners (New York Stock Exchange: EPD) And United Parcel Service (New York Stock Exchange: UPS). Here’s why.

The enterprise is boring in a good way

Enterprise Products Partners is a limited liability partnership (MLP) that operates in the midstream segment of the oil and gas industry. It owns vital infrastructure assets such as pipelines, storage facilities, processing and transportation facilities. While oil and gas companies are often volatile, Enterprise essentially just takes over the fees, charging customers for using its assets. Given the importance of oil and natural gas to the global economy, demand for Enterprise’s assets tends to be quite strong in both good and bad energy markets.

Image source: Getty Images.

Simply put, Enterprise’s cash flows tend to be fairly resilient, no matter what happens with oil prices. This is how MLP has managed to increase its distribution every year for 26 years in a row, despite operating in the often volatile energy sector. Add to that an investment-grade balance and distributable cash flow that covers distributions 1.7 times, and you have a very reliable income cushion.

However, it is important for investors to understand that growth opportunities in the mid-market sector are quite limited. Enterprise’s attractive 6.6% yield is likely to make up the majority of your profits. However, Enterprise is one of the largest mid-market players in North America, so its modest capex budget will likely be supplemented by acquisitions along the way. Distribution growth of around single digits is likely a reasonable expectation over time. This is not a bad combination if you are a dividend investor and want to maximize the income stream your portfolio generates.

UPS More Prone to Dividend Growth

Slow and steady growth with high returns is what you get from Enterprise. United Parcel Service is a little different, offering higher dividend growth but a lower yield. To summarize, UPS, as the company is more commonly known, has increased its dividend by an average of 10% per year over the past decade. That’s two to three times faster than historical inflation rates, so this package delivery service has significantly increased the purchasing power of its dividend over time.

What’s really interesting about UPS today, however, is that its 4.8% yield is near the top end of the stock’s historical return range. This suggests that the company is now for sale. There is a reason for this, given that the business is not operating at full capacity. However, in the third quarter of 2024, revenue and operating margins improved year over year, so the company is working to get back on track and appears to be making progress. There is still work to be done, but management appears to be moving its business in the right direction.

However, the real attraction here is the business. UPS is one of the few very large package delivery companies. It would be difficult, if not impossible, to replicate what UPS offers. And with online shopping continuing to grow, it’s likely that more demand is on the horizon. If you can handle the turnaround, UPS looks like a fallen angel of a dividend growth stock that’s already starting to get its wings back.

Two reliable dividend options you can earn from right now

If you have $500, $5,000, or even $5 million and like dividend stocks, Enterprise and UPS are worth a look. One would be a better option for investors looking for high-yield stocks, while the other would likely appeal to those looking for dividend growth. But both businesses have very attractive characteristics and returns that you can count on for years to come.

Don’t miss your second chance at a potentially profitable opportunity.

Have you ever felt like you missed out on the best performing stocks? Then you’ll want to hear this.

In rare cases, our expert team of analysts issues Promotion “Double the rate” recommendations for companies that they think are about to become popular. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you had invested $1,000 when we doubled down in 2009, you will have $368,053!*

• Apple: if you had invested $1,000 when we doubled in 2008, you will have $43,533!*

• Netflix: if you had invested $1,000 when we doubled down in 2004, you will have $484,170!*

We’re sending out Double Down alerts for three great companies right now, and there may not be another chance like this anytime soon.

See 3 Double Down promotions »

*Stock Advisor returns as of November 18, 2024.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Enterprise Product Partners and United Parcel Service. The Motley Fool has a disclosure policy.