What's the biggest drawback to investing in stocks that offer high dividend yields? Those high yields often come joined at the hip with high risk.
Investors don't always have to make the trade-off between juicy income and risk, though. Here are three super-safe high-yield dividend stocks you can buy right now.
1. Brookfield Infrastructure
It's important to first know that you can invest in Brookfield Infrastructure(NYSE: BIP)(NYSE: BIPC) in a couple of ways. The company's limited partnership (LP) units trade under the BIP ticker, while its corporate shares trade under the BIPC ticker. Both offer great distributions. BIP's yield currently stands at a hair under 5%, with BIPC's yield a little lower at 4.25%.
Brookfield Infrastructure has increased its distribution for 14 consecutive years. The company plans to keep that streak going and targets annual distribution growth of 5% to 9%.
I think that Brookfield Infrastructure's distribution is rock-solid. The company generated funds from operations (FFO) in the third quarter of 2023 that were nearly two times greater than its quarterly distribution payout. More importantly, its underlying businesses (which include utilities, pipelines, data centers, and more) consistently generate solid cash flow month in and month out.
Roughly 90% of Brookfield Infrastructure's cash flow is contracted or regulated. Around 80% of its cash flow is either protected from or indexed to inflation. These factors give me even more confidence that the company's distribution is safe.
2. Enterprise Products Partners
Enterprise Products Partners(NYSE: EPD) is a leading midstream energy company that operates more than 50,000 miles of pipeline in North America. It's also a great pick for income investors, in my view, with its distribution yield of nearly 7.7%.
How reliable is Enterprise Products Partners' distribution? Very. The company has increased its payout for 25 consecutive years. Even better, the compound annual growth rate of those increases is close to 7%.
Although the energy sector can experience significant volatility, Enterprise Products Partners has been a textbook example of resiliency. The company generated double-digit-percentage returns on invested capital (ROIC) and solid cash flow per unit even during the financial crisis of 2007 and 2008 and the COVID-19 pandemic period.
I'm not worried about the global focus on reducing the use of fossil fuels hurting Enterprise anytime soon. Experts predict that the use of oil and gas will rise over the next few decades even with increased adoption of renewable energy sources. Enterprise Products Partners' exceptional distributions should keep on flowing and growing for a long time to come.
3. Kenvue
I can't think of many dividend stocks that are safer than Johnson & Johnson. It's a Dividend King that has increased its dividend for 61 consecutive years. The problem, though, is that J&J doesn't quite qualify as a high-yield dividend stock. However, we can get many of the positives that J&J offers along with a juicy dividend yield of nearly 3.7% with Kenvue(NYSE: KVUE).
Johnson & Johnson spun off its consumer health business as a stand-alone company last year, naming it Kenvue. The newly formed company inherited all of J&J's iconic consumer health brands, including Band-Aid, Listerine, Neutrogena, and Tylenol.
It didn't take Kenvue long to declare its first dividend. The company's CFO, Paul Ruh, said in the third-quarter conference call in October 2023 that "dividends serve as an important part of our TSR [total shareholder return] algorithm."
To be sure, Kenvue isn't likely to deliver jaw-dropping growth. But for investors seeking a reliable dividend that's likely to grow in the future, this J&J spinoff looks like a solid pick.
Should you invest $1,000 in Kenvue right now?
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Keith Speights has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, and Enterprise Products Partners. The Motley Fool has positions in and recommends Kenvue. The Motley Fool recommends Brookfield Infrastructure Partners and Enterprise Products Partners and recommends the following options: long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.
