When it comes to the uncertain economy, nothing beats a diversified portfolio of dividend growers for building generational wealth. If you’re an investor in search of high yield and rising dividends, you won’t want to miss out on these three blue-chip stocks offering attractive margins of safety and average yields of 6.5%.
Let’s dive in and take a closer look at three companies that not only deliver impressive income, but also have the potential to outperform the market over the long term.
Enterprise Products Partners L.P. (EPD): One Of The Most Reliable Income Stocks On The Planet
When it comes to master limited partnerships (MLPs), Enterprise Products Partners stands out as the most proven business in the field. This company ticks all the boxes for investors looking for reliability and stability. With an outstanding management team and ownership stake in EPD, you can rest easy knowing that your interests align with theirs.
EPD’s extensive pipeline network, spanning over 50,000 miles, ensures continuous demand for the natural gas liquids, refined products, and crude oil it transports and stores. As the world continues to depend on fossil fuels, even in the face of evolving energy trends, EPD’s long-term growth potential remains substantial.
Offering a secure 7.2% yield, well above the risk-free rate, EPD presents investors with an enticing income opportunity. With its recent distribution increase and strong cash flow coverage, this MLP demonstrates a commitment to its shareholders. And with a discounted valuation, currently trading at a 23% discount, EPD offers a potential 38% upside in the next 12 months.
Looking further ahead, EPD’s total return potential is equally impressive. With a yield, growth, and valuation expansion, annual returns of 13.4% could be on the cards, surpassing the S&P 500’s anticipated returns of 10%.
Main Street Capital (MAIN): A Best-Of-Breed Business Development Company (BDC)
When it comes to the world of business development companies (BDCs), Main Street Capital is a clear standout. Since its IPO in 2007, MAIN has consistently delivered exceptional returns to its shareholders. A $10,000 investment in 2007 would be worth an impressive $99,000 as of June 30, far outperforming similar investments in the S&P BDC index and the S&P 500 index.
Main Street Capital’s focus on lending to lower middle market businesses, coupled with its well-diversified investment portfolio, minimizes concentration risk and ensures continued growth. As these businesses face challenges securing funding from banks, MAIN steps in with capital, establishing itself as a trusted financial partner.
With a management team and board of directors heavily invested in MAIN, the company’s commitment to creating value for shareholders is evident. This dedication, combined with an investment-grade credit rating, positions MAIN as a reliable income stock for investors. Currently trading at a 30% discount to its fair value, MAIN has the potential for a remarkable 51% upside in the next 12 months, supported by its fundamentals.
Looking ahead, Main Street Capital’s annual total return potential remains strong. With a yield, growth, and valuation expansion, investors could enjoy returns of 18.6% annually, outperforming the S&P 500’s projected returns of 10%.
Philip Morris International Inc. (PM): Becoming the Tobacco Industry’s King of Today and Tomorrow
While Philip Morris International is widely known for its Marlboro brand, its strategic move to launch the heat-not-burn IQOS product has positioned PM as a front-runner in the tobacco industry’s future. With approximately 150 million customers, PM’s IQOS product already boasts 27.2 million users, showcasing its potential for growth.
As the demand for less harmful tobacco products increases, PM’s smoke-free portfolio, which includes IQOS and the top nicotine pouch brand Zyn, gives the company a competitive edge. With over 35% of its revenue coming from smoke-free products, PM is well-prepared for the continuing decline in cigarette volumes.
Backed by its investment-grade credit rating and strong capital preservation, PM offers a secure 5.6% dividend yield. With a payout ratio that leaves ample room for growth, investors can expect PM’s dividend to continue to rise. Trading at a 17% discount to its fair value, PM presents a compelling opportunity for investors, with a potential 27% upside in the next 12 months.
Looking towards the future, Philip Morris International offers robust total return potential. With a yield, earnings growth, and valuation expansion, investors could enjoy annual returns of 16.5%, surpassing the S&P 500’s projected returns of 10%. Over a 10-year timeframe, PM’s total return potential outshines the S&P 500’s by a staggering 360%.
Summary: Secure And Outsized Income That Can Crush The Market
These three no-brainer buys, Enterprise Products Partners L.P., Main Street Capital, and Philip Morris International Inc., are poised to deliver secure and outsized income for investors seeking reliable dividends and long-term growth. With their investment-grade balance sheets, healthy growth potential, and generous yields, these stocks present a remarkable opportunity for income, growth, and capital appreciation.
By investing in EPD, MAIN, and PM, investors can expect above-average income and impressive annual total returns of around 16% over the next decade. This compares favorably to the S&P 500’s projected 1.6% yield and 10% annual total returns. With their discounted valuations and strong fundamentals, these companies are certainly worth considering for income-focused investors looking to outperform the market.