Volatility has returned to the stock market to start the year. The Nasdaq Composite is down 8% year to date while other market indexes are right behind it. There’s no telling how long this turbulence could last.
While volatile times can be tough to stomach, some companies have proven their ability to withstand these rough patches. Enterprise Products Partners (EPD 1.88%), Enbridge (ENB 0.66%), and Brookfield Infrastructure (BIPC 1.52%) (BIP 1.74%)Â stand out to a few Fool.com contributors for their ability to pay safe and secure dividends in good times and bad. That makes them great stocks to buy during the current stock market uncertainty.
26 years of increasing its distribution — and counting
Reuben Gregg Brewer (Enterprise Products Partners): Worried investors might think that buying an energy stock makes little sense, given the sector’s inherent volatility. But Enterprise Products Partners operates in the midstream niche of the energy sector. It owns pipelines and other energy infrastructure that move oil and natural gas around the world.
Energy prices aren’t the prime determinant of its success, since it charges fees for the use of its assets. Thus, energy demand, which tends to be robust no matter what is going on in the world, is the vital issue to monitor.
The proof of the safety inherent in Enterprise’s business model is its 26-year-long streak of annual distribution increases. That’s very clearly impressive, given the volatility that has existed in the energy market and the stock market over that span. Investors owning Enterprise could ignore all of that and just focus on collecting their quarterly distribution checks.
But a reliable distribution isn’t the only reason to view Enterprise as a safe harbor in stormy seas. Enterprise has an investment-grade-rated balance sheet. Its distribution is covered 1.7x over by its distributable cash flow. And its leverage has historically been at the low end of its closest peer group, highlighting that it has long been operated in a conservative manner.
This midstream master limited partnership (MLP) is built from the ground up to be a boring income stock. Its lofty and well-supported 6.3% distribution yield could make a fine addition to your portfolio if you want to sleep well at night while the market has become increasingly turbulent.
As reliable as it gets
Matt DiLallo (Enbridge): Enbridge has proven the resiliency of its dividend over the decades. The Canadian pipeline and utility giant has paid dividends for over 70 years, while increasing its payout for the last 30 years in a row. That’s impressive, considering all the volatility in the energy sector.
A big driver of Enbridge’s steadily growing dividend is the predictability of its earnings. About 98% of its income comes from stable cost-of-service or contracted assets. That gives it a lot of visibility into its future earnings.
Last year was the 19th straight year the company achieved its annual financial guidance. The company dealt with a lot of turbulence during that period, including the financial crisis, an oil price collapse, forest fires in Canada, a global pandemic, and spiking inflation.
Meanwhile, Enbridge pays out a relatively conservative percentage of its stable cash flow in dividends (60% to 70% per year). That gives it a nice cushion while allowing it to retain billions of dollars in cash each year to fund expansion projects. Enbridge also has a rock-solid, investment-grade credit rating, giving it additional financial flexibility to invest in expansion projects.
The company currently has a multibillion-dollar backlog of commercially secured capital projects that should come online through the end of the decade. Those projects should grow its cash flow per share by around 3% annually through next year, and at a 5% yearly rate post-2026. That should give Enbridge plenty of fuel to continue increasing its dividend.
A solid dividend stock for volatile times
Neha Chamaria (Brookfield Infrastructure): There’s little chance for an infrastructure stock to come up during a discussion about safe dividend stocks. Brookfield Infrastructure, however, is different. Although the company owns and operates large infrastructure assets, they’re primarily resilient, contract-based businesses such as utilities, energy pipelines, rail and toll roads, and data infrastructure, including telecom sites, fiber-optic cable networks, and data centers.
Not surprisingly, Brookfield Infrastructure prides itself in generating “sustainable and growing” distributions (or dividends) for its shareholders over the long term. The stock has done a great job so far, having paid a dividend every year since the company’s formation in 2008. Even better, Brookfield Infrastructure has grown its dividend per share by a compound annual growth rate (CAGR) of 9% between 2009 and 2025. While units of the partnership yield 6.3%, the corporate shares yield 5% today.
Now the question is: Is Brookfield Infrastructure’s dividend and yield safe? I’d answer that with a resounding yes, and would be surprised if the company breaks its dividend growth streak. As I mentioned, Brookfield Infrastructure operates toll-like businesses with predictable cash flows. At the same time, it sells assets as they mature to reinvest the proceeds into assets with higher return potential. The strategy has worked well, driving its funds from operations (FFO) per share by a CAGR of 14% since 2009.
With Brookfield Infrastructure targeting 5% to 9% annual dividend growth over the long term, this stock is a solid bet for volatile times.
Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Partners, Enbridge, and Enterprise Products Partners. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has positions in Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Brookfield Infrastructure Partners and Enterprise Products Partners. The Motley Fool has a disclosure policy.
