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The stock market has experienced notable fluctuations in recent months, driven by factors like tariffs and various economic uncertainties. Increasing concerns about a potential recession in the United States have dominated discussions among investors.
In such unpredictable times, it can be beneficial to pivot towards safer investment avenues that promise consistent returns. High-quality dividend stocks stand out as reliable options, and two prominent choices right now are Enterprise Products Partners and NNN REIT. Both companies have demonstrated impressive dividend growth over more than 25 years, showcasing resilience even amidst economic turmoil. Their robust business structures make them excellent candidates for investors looking to deploy capital wisely at present.
A solid passive income opportunity
Enterprise Products Partners ranks among the largest energy midstream operators in the United States, boasting an extensive network of pipelines, processing facilities, storage units, and export terminals. These assets contribute to a steady cash flow for the master limited partnership (MLP) through long-term contracts and regulated rate models. Currently, the company offers a substantial distribution with nearly a 7.5% yield, which means a $250 investment could yield close to $19 annually in passive income.
This impressive distribution is underpinned by solid cash flows, with Enterprise Products covering its payout 1.7 times over the previous year. Additionally, the company enjoys a strong balance sheet characterized by an A-rated credit profile and low leverage, enhancing its financial stability.
Furthermore, Enterprise Products is actively investing in its growth, maintaining $7.6 billion in key capital projects that are set to come online and bolster cash flow through the upcoming year. This growth strategy, combined with the company’s potential for further expansions through acquisitions—such as last year’s purchase of Pinon Midstream for $950 million—positions them for ongoing dividend increases. Over 26 consecutive years, Enterprise has raised its distribution, making it a solid choice for income-seeking investors willing to navigate the complexities of MLP investing, which typically involves the issuance of a Schedule K-1 tax form each year.
Reaching new heights
NNN REIT operates within the real estate investment trust (REIT) sector, specializing in acquiring single-tenant retail buildings, including automotive service stations and convenience stores. The company utilizes long-term, triple net leases with tenants, which guarantees stable rental income as tenants assume responsibility for property taxes, routine maintenance, and insurance. The predictable cash flow supports a dividend yield exceeding 6%, translating to more than $15 in annual dividend income from a $250 investment.
This sustainable payout is supported by strong financial performance, with NNN REIT generating approximately $200 million in excess free cash flow after distribution payments each year. Its conservative financial approach includes a leading 12.1-year weighted average debt maturity, ensuring financial flexibility for future acquisitions of income-generating properties.
The REIT’s growth is primarily driven through sale-leaseback transactions with existing tenants, enabling continued expansion of its portfolio and revenue streams. Last year, NNN REIT marked its 35th consecutive annual dividend increase, a feat only achieved by a select few companies in the public market.
Resilience amid economic challenges
Both Enterprise Products Partners and NNN REIT have consistently increased their dividends throughout the years, highlighting the strength of their business models and conservative financial strategies. These characteristics position them well to navigate various economic conditions, allowing for continued dividend enhancements. Consequently, they are compelling options for investors seeking stable and dependable passive income sources.
Source
www.fool.com