2 no-fuss, high-yield dividend growth stocks to buy now for $500

When investors consider high-yield stocks, yield is often the only issue considered. This is a mistake because sometimes high yields are a sign of a risky dividend. That’s why you should also check the company’s yield support and, just as importantly, its commitment to supporting the dividend in good markets and bad. For now, dividend investors should probably consider reliable income stocks Enterprise Products Partner (EPD 0.91%) And United Parcel Service (UPS 2.47%). Here’s why.

Enterprise is boring in a good way

Enterprise Products Partners is a master limited partnership (MLP) operating in the midstream segment of the oil and natural gas industry. It owns key infrastructure assets such as pipelines, storage, processing and transportation facilities. While oil and natural gas companies are often volatile, Enterprise is essentially just a tariff collector that charges its customers fees for using its assets. Given the importance of oil and natural gas to the global economy, demand for corporate assets tends to be quite high in both good and bad energy markets.

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Simply put, Enterprise’s cash flows tend to be fairly robust regardless of how oil prices perform. MLP has managed to increase its payout every year for 26 years in a row, despite operating in the often volatile energy sector. Add in an investment-grade balance sheet and distributable cash flow that covers the distribution at a strong 1.7x, and you get a very reliable income stock.

However, it is important for investors to understand that the growth opportunities in the midstream space are quite limited. Enterprise’s attractive yield of 6.6% will likely make up the majority of your returns. Still, Enterprise is one of the largest midstream players in North America, so a modest capital investment budget will likely be bolstered through acquisitions over time. Low to mid-single digit distribution growth over time is likely a reasonable expectation. That’s not a bad combination if you’re a dividend investor looking to maximize the income stream your portfolio generates.

UPS has more of a penchant for dividend growth

Slow and steady growth with high returns is what you get from Enterprise. United Parcel Service is a little different, offering higher dividend growth but a lower yield. To put it in numbers, UPS, as the company is commonly known, has increased its dividend by an average of nearly 10% per year over the past decade. That’s two to three times faster than the historical growth rate of inflation, so this package delivery service has significantly increased the purchasing power of its dividend over time.

But what’s really exciting about UPS today is that its 4.8% yield is near the high end of the stock’s historical return range. This suggests that the company is currently for sale. There is a reason for this, because business is not running at full speed. However, the third quarter of 2024 saw year-over-year improvements in revenue and operating margin, so the company is working to get back on track, and appears to be doing so. There’s still a lot of work to be done, but management looks like the company is heading in the right direction.

However, the real appeal here lies in the business. UPS is one of the few very large package delivery companies. It would be difficult, if not impossible, to replicate UPS’ offering. And as online shopping continues to increase, it is very likely that higher demand is on the horizon. If you’re dealing with a turnaround situation, UPS looks like a fallen angel dividend growth stock that’s already in the process of regaining its wings.

Two solid dividend options you can take advantage of now

If you have $500, $5,000, or even $5 million and like dividend stocks, you should check out Enterprise and UPS. One will be a better option for investors looking to own high-yield securities, while the other will likely attract those looking for dividend growth. However, both companies have very attractive features and returns that you can rely on for years to come.