These incredible oil stocks, yielding between 3.6% and 6.5%, should increase their dividends every year for years to come.
What if you could put money into something and earn a regular income from it without doing much? That’s what passive income is all about, and dividend investing is one of the best ideas to earn passive income. It’s a simple strategy: Buy stocks that pay regular and growing dividends, and you’re all set. It’s even better if the stocks offer high yields, backed by rising cash flows and dividend growth.
If you’re wondering where to start, the energy sector is offering some really lucrative dividends now. So here are three incredible oil stocks to buy right now that could earn you decades of passive income.
Expect growing passive income from this oil stock
Enbridge (ENB 0.66%) is one of the largest energy infrastructure companies in the U.S. It moves almost 30% of all crude oil produced in North America through its liquids pipeline and delivers nearly 20% of the natural gas consumed in the U.S. through its midstream and gas transmission network.
Enbridge went on an acquisition spree in 2024 and bought three gas utilities for $19 billion. These businesses should not only contribute to the company’s distributable cash flows (DCF), but also add greater stability to its cash flows given the regulated nature of utilities. That’s one of the primary reasons I believe Enbridge is a great dividend stock to buy right now for decades of passive income.
Enbridge also has an impeccable dividend track record, having increased its dividend annually for 30 consecutive years. I also like that the company maintains a payout ratio of 60% to 70% on its DCF, which leaves a buffer to reinvest into growth and increase its dividend even during challenging times. With a backlog of $29 billion, Enbridge looks poised to grow its DCF and dividends consistently for years to come. Enbridge stock also yields a hefty 6.2%, making it a solid buy for passive income.
A solid 6.5%-yielding stock for regular passive income
Like Enbridge, Enterprise Products Partners (EPD 1.88%) is one of the largest pipeline stocks in the U.S., but there’s something big coming up for the company. The thing is, Enterprise Products has projects worth $6 billion slated to come online this year. That’s 80% of all capital projects presently under construction, which means Enterprise Products could be entering its next growth phase now with solid visibility into business and dividend growth.
Enterprise Products has increased its dividend for 26 consecutive years, and its new projects should boost its DCF to support bigger dividends in the coming years. As it is, the midstream giant generates steady cash flows primarily because of two factors. First, nearly 90% of its contracts have escalation provisions, which means Enterprise Products can increase its contract prices in line with inflation. While this clause mitigates the impact of inflation on Enterprise Products’ cash flows, the long-term nature of its contracts mitigates the impact of volatility in commodity prices.
With Enterprise Products’ net income and DCF hitting record highs in 2024 and the company gearing up for a big year ahead as its major expansion projects come online, the time is ripe to buy this oil and gas dividend growth stock for decades of passive income. Enterprise Products stock also offers a high yield of 6.5%, further adding to its appeal.
42 years of dividend raises, big growth plans
While Enbridge and Enterprise Products Partners are midstream energy companies, ExxonMobil (XOM 2.97%) is the largest oil and gas producer in the U.S. You’d think that would make the company’s cash flows highly volatile — and its dividends irregular — given its exposure to oil and gas prices. Wait until you see ExxonMobil’s dividend track record and the kind of value its dividends, when reinvested, have added to the stock’s total returns in recent years.
An investment in ExxonMobil stock five years ago, for instance, would have more than tripled your money by now, despite ExxonMobil being a commodity stock.
XOM data by YCharts
While maintaining a strong balance sheet and investing in growth, ExxonMobil also prioritizes paying a “sustainable, competitive, and growing dividend.” That explains why ExxonMobil has increased its dividend for 42 consecutive years now, and its growth moves should further boost its dividends.
In December last year, ExxonMobil announced big growth plans. Among other things, it plans to invest at least $27 billion annually into growth through 2030 and expects to generate incremental net income of $20 billion and incremental operating cash flow of nearly $30 billion by 2030 versus 2024. That’s really impressive growth for an oil company, and should hugely work in favor of its shareholders. With ExxonMobil stock also yielding a decent 3.6%, this oil stock is a solid buy to earn a regular stream of passive income for decades.
Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
