We recently published a list of Dividend Champions List: Top 15. In this article, we are going to take a look at where Enterprise Products Partners L.P. (NYSE:EPD) stands in the dividend champions list.

In this dividend champions list, we will take a look at some of the best dividend stocks with at least 25 consecutive years of dividend growth and yields above 4%.

Dividend champions are companies that have raised their dividends for at least 25 years. While they share this trait with dividend aristocrats, the key difference is that dividend champions don’t need to be part of the S&P Index, whereas aristocrats do. Despite this distinction, what truly sets these stocks apart is their long-standing history of consistently increasing dividend payments to shareholders over time.

Dividend growth is one of the most appealing qualities a company can have in today’s market. Achieving 25 consecutive years of dividend increases is especially impressive, as these companies were able to boost their payouts even through challenging periods like the recent pandemic.

Although dividend stocks have lagged behind the market due to the growing prominence of tech stocks, the value of steady income remains irreplaceable. Dividend stocks are unlikely to fall out of favor. Analysts continue to express confidence in their potential. Earlier this year, BofA predicted that dividend stocks are set for growth, noting they should perform well even if consumer spending slows or a full recovery doesn’t materialize. Subramanian from BofA added that if the Federal Reserve cuts rates or halts hikes, companies can maintain their dividends by borrowing at lower interest rates. The analyst also highlighted that income investors have plenty of options for investing in dividend-paying stocks, such as broad mutual funds or exchange-traded funds (ETFs). This provides a variety of avenues to tap into dividend income.

US companies have focused on paying dividends to shareholders due to their growing cash reserves. At the end of the fourth quarter of 2023, businesses held $3.61 trillion in cash and equivalents on their balance sheets. This marked a 2% decline from the end of 2021 but an 11% increase compared to 2022, according to S&P Global Market Intelligence. The substantial cash reserves held by US companies had a significant impact on their dividend payments. A report by Janus Henderson highlighted that US businesses paid shareholders $161.5 billion in dividends during the second quarter of 2024, marking an 8.6% increase on an underlying basis. Companies paying dividends for the first time this year made the largest contribution to this growth, raising the US underlying total by 3.6 percentage points. While these companies’ dividends are relatively small compared to their profits, they still contributed a notable $3.8 billion. Excluding this effect, the remaining companies in the index saw a 5.0% growth, which aligns more closely with the nation’s long-term trend. This surge from new dividend payers is expected to continue throughout the year, keeping US payout growth ahead of the global average. The report further mentioned that 96% of the companies either maintained or increased their dividends during the quarter.

When investing in dividend stocks, many investors tend to prioritize dividend yields. However, experts recommend focusing more on stocks with consistent dividend growth rather than simply chasing high yields, which may not always be sustainable. That said, dividend yields aren’t necessarily a bad option. A balanced approach that combines healthy yields with steady dividend growth can provide strong investment opportunities for investors. In this dividend champions list, we will take a look at the highest-yielding stocks with at least 25 consecutive years of dividend growth.

Our Methodology:

For this list, we looked at a group of over 150 dividend champions, which are known for raising dividends for 25 years or more. From this list, we chose companies with the highest dividend yields as of September 24 and arranged them in order from lowest to highest yield.

We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).

Enterprise Products Partners L.P. (NYSE:EPD)

Dividend Yield as of September 24: 7.12%

Enterprise Products Partners L.P. (NYSE:EPD) is a Texas-based midstream natural gas and crude oil pipeline company that offers related products and petrochemicals. The company is a strong dividend payer, having raised its dividends for 26 consecutive years. Its quarterly dividend currently sits at $0.525 per share for an impressive dividend yield of 7.12%, as of September 24.

Unlike many other energy companies that depend on commodity prices for their revenue and earnings, Enterprise Products Partners L.P. (NYSE:EPD) generates income by charging fees for the use of its assets. As a result, the demand for energy is more crucial to its performance than the prices of the products transported through its midstream system. This model offers a degree of stability, as energy demand remains strong even when prices are low. In the second quarter of 2024, the company reported revenue of $13.5 billion, reflecting a 27% increase from the same period last year.

Enterprise Products Partners L.P. (NYSE:EPD) also saw its operating income rise to $1.8 billion in Q2 2024, up from $1.5 billion in the previous year. Its robust cash flow supports its dividend payments, with the company generating $1.8 billion in distributable cash flow (DCF) in the latest quarter, an increase from $1.7 billion in the same period last year. Operating cash flow was $2.1 billion, compared to $1.9 billion in Q2 2023. Additionally, the company maintains a sustainable payout ratio; for the twelve months ending June 30, the payout ratio, which includes distributions to common unitholders and buybacks of partnership common units, stood at 55% of the adjusted cash flow from operations.

Of the 912 hedge funds tracked by Insider Monkey at the end of Q2 2024, 23 funds owned stakes in Enterprise Products Partners L.P. (NYSE:EPD). These stakes are worth $310 million in total.

Overall, UBSI ranks 2nd on our list of dividend champions. While we acknowledge the potential for MO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UBSI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. 

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Disclosure: None. This article is originally published at Insider Monkey.