The stock market has gyrated wildly in recent weeks. The S&P 500 briefly entered bear market territory (a 20% decline from the recent peak) after a brutal stretch to start the month following President Donald Trump’s decision to levy heavy reciprocal tariffs on imports. However, his decision to pause for 90 days sent stocks soaring in one of their best days since World War II.
This whipsaw action by the market makes it hard to know how to invest since many economists believe that tariffs of the magnitude the administration has announced could cause a major recession. While an economic downturn could significantly impact many companies, others have more recession-resistant businesses.
Enterprise Products Partners (EPD 1.17%), NextEra Energy (NEE -1.51%), and Brookfield Infrastructure (BIPC 1.93%) (BIP 2.80%) stand out to a few Fool.com contributors for the durability of their business models. Because of that, they should have no trouble continuing to pay and grow their high-yielding dividends.
Enterprise Products Partners’ 6.9% yield is rock solid
Reuben Gregg Brewer (Enterprise Products Partners): With a string of 26 consecutive annual distribution increases, Enterprise Products Partners has a proven track record of rewarding investors well. Now, add in the midstream master limited partnership’s (MLP’s) lofty 6.9% distribution yield, and you can see why you might want to buy it. That said, there’s a lot more to like about Enterprise, given the market’s current upheaval.
For starters, energy is a necessity of modern life. While energy prices can be volatile, the energy infrastructure that Enterprise owns tends to produce reliable cash flows because of the toll-taker nature of the midstream sector. So long as the demand for energy remains robust, which is highly likely, Enterprise will continue to have ample distributable cash flow to pay its distribution. On that score, the pipeline owner’s distributable cash flow covered its distribution by 1.7x in 2024. That leaves a lot of room for adversity before a cut would be in order.
Meanwhile, Enterprise’s balance sheet is investment-grade-rated, and the company has $7.6 billion worth of capital investment projects in the works. So, in a worst-case scenario, it could lean on its balance sheet to support its distribution if it had to. And in a best-case scenario, it has an opportunity to keep growing its distribution in the years ahead as new investments start to add to cash flow. All in, no matter what happens on Wall Street, Enterprise looks like it is prepared to keep paying investors very well to stick around.
Stable cash flow and steady growth
Matt DiLallo (NextEra Energy): NextEra Energy operates one of the country’s largest electric utilities (Florida Power & Light), which generates very stable cash flow backed by government-regulated rates and steady electricity demand. The company also has a large portfolio of energy infrastructure assets (NextEra Energy Resources) that produce stable cash flow backed by long-term, fixed-rate contracts. This business model produces tremendously durable cash flow that’s highly resistant to economic downturns.
For proof, we can look at NextEra Energy’s dividend. The utility has increased its payment every year for the past three decades, which included several recessions.
NextEra Energy fully expects to continue growing its high-yielding dividend (nearly 3.5%). Its target is to increase its payment by around 10% annually through at least 2026. Thanks to its below-average dividend payout ratio and the visible growth ahead, it can deliver that robust growth rate.
The utility expects to grow its adjusted earnings per share by a 6% to 8% annual rate through 2027 from last year’s baseline. Powering that growth is its heavy investment in building new renewable energy-generating capacity at FPL and within its energy resources segment.
Meanwhile, it has lots more growth ahead. Demand for electricity in the U.S. is accelerating, powered by the onshoring of manufacturing, electric vehicles, and artificial intelligence (AI) data centers. Forecasters project that power demand will grow a staggering 55% by 2040. That should provide NextEra Energy with plenty of opportunities to invest in expanding its power platforms.
The steady growth should continue
Neha Chamaria (Brookfield Infrastructure): Brookfield Infrastructure has increased its dividend every year for 16 consecutive years now. Importantly, those dividends were always backed by growing cash flows, which is one of the biggest reasons why I believe this is among the few stocks that could reward you no matter where the stock markets go.
Brookfield Infrastructure grew its dividend by a compound annual growth rate (CAGR) of 9% between 2009 and 2024 and funds from operations (FFO) per unit at a CAGR of 15% during the period. That means the company has generated enough cash flows year after year to invest in growth and pay bigger dividends. There’s a reason behind Brookfield Infrastructure’s solid FFO and dividend streak.
Brookfield Infrastructure owns and operates a large base of assets that are mostly regulated, such as utilities, rail and toll roads, midstream energy, and data centers. So, almost 85% of its FFO is regulated or contracted and indexed to inflation. That means Brookfield Infrastructure can generate steady cash flows regardless of how the economy fares, making this stock an intriguing bet during uncertain times.
Brookfield Infrastructure also consistently recycles capital, selling assets as they mature and using the proceeds to buy new assets. For example, in March, it sold a 25% stake in a U.S. gas pipeline. This month, it struck a deal to acquire midstream energy assets from Colonial Enterprises.
The steady flow of cash flows from its assets and proceeds from the sale of mature assets has helped Brookfield Infrastructure not only grow its business but also consistently reward shareholders. With shares of the corporation yielding 4.9%, units of the company’s partnership yielding 6.2%, and the company targeting 5% to 9% annual dividend growth, Brookfield Infrastructure is a dividend stock to double up on in today’s volatile times.
Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, Enterprise Products Partners, and NextEra Energy. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Brookfield Infrastructure Partners and Enterprise Products Partners. The Motley Fool has a disclosure policy.
