Key Points

• The energy sector is going through a transition that will likely take decades.

• TotalEnergies is using its oil profits to fund its clean energy investments.

• Enbridge is focused on providing both carbon-based and clean energy.

• 10 stocks we like better than Enbridge ›

There are short-term gyrations that will always be present in the energy sector, given the volatile nature of oil and natural gas prices. And then there are longer-term trends that can be seen as a headwind or an opportunity.

I prefer to see the silver lining on the clean energy cloud by owning high-yield energy stocks TotalEnergies (NYSE: TTE) and Enbridge (NYSE: ENB). Here's why you might want to buy them, too.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

TotalEnergies is an integrated giant

TotalEnergies competes with energy giants ExxonMobil, Chevron, Shell, and BP. They all have the same basic business model, which entails owning assets across the energy value chain, from production (upstream) to transportation (midstream) and on to chemicals and refining (downstream). This diversification helps to soften the peaks and valleys that come from volatile energy prices.

Image source: Getty Images.

The big point of differentiation between TotalEnergies and its closest peers is that the French energy giant has made a strong commitment to investing in electricity and clean energy. Exxon and Chevron have basically chosen to stick with their core. Shell and BP both announced plans to invest in clean energy, but have since walked those plans back. TotalEnergies, if anything, has increased the pace of its investment. And, notably, it maintained its dividend when it announced its clean energy push while Shell and BP both cut their dividends when they made the same announcements.

This is still only a relatively small part of TotalEnergies' business, at roughly 10% of adjusted operating income from the company's business segments in 2024. That was up 17% from 2023 and the only segment that saw an increase, highlighting the diversification value this business offers.

That said, this is not a short-term play. TotalEnergies is looking at the long-term shifts in the industry and preparing now for a future that includes dramatically more electricity. Just as one example, the U.S. is expected to see electricity increase from 21% of end energy use in 2020 to 32% by 2050. That's a huge change and one that is likely to be seen the world over. Add in TotalEnergies' lofty 6.3% dividend yield and I'm a happy shareholder. (U.S. investors have to pay French taxes on the dividend, but can claim some of that back come tax time.)

Enbridge's fee-based business has a clean energy twist

TotalEnergies provides me with direct exposure to oil and natural gas. Canadian midstream giant Enbridge is more about a boring and consistent energy-adjacent dividend. The lofty 6% or so dividend yield is backed by the company's portfolio of fee-generating energy infrastructure assets. The largest contributions come from Enbridge's oil and natural gas pipelines, which is perfectly fine by me. These carbon fuels will likely be needed for decades to come.

That said, Enbridge has been increasingly investing in clean energy and regulated natural gas utilities. Together these businesses represent about a quarter of the company's earnings before interest, taxes, depreciation, and amortization (EBITDA). But they keep the company moving in the same direction as the world around it on the energy front.

The most notable thing here, however, is that Enbridge's natural gas utility and clean energy businesses are also consistent producers of cash flow. Regulation is the reason for that within the natural gas utility operation while long-term supply contracts are the core support in the clean energy segment. And so, Enbridge is changing with the world while continuing to hue to its own focus on generating reliable cash flows.

I'm letting others do the work for me

I don't really know which clean energy technology is going to be the big winner. Nor do I know the time frame for the energy transition. So I've chosen to invest in two "old" energy stalwarts that provide me with generous dividends and that are preparing today for a future that will include more clean energy. That way I can just collect the dividends while I leave the hard work of figuring out the clean energy transition up to TotalEnergies and Enbridge.

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Reuben Gregg Brewer has positions in Enbridge and TotalEnergies. The Motley Fool has positions in and recommends Chevron and Enbridge. The Motley Fool recommends BP. The Motley Fool has a disclosure policy.

The energy midstream sector has been a great spot for investors to go if they want to make some passive income. Many companies in this sector produce very stable cash flow as oil and gas flow through their pipelines and related midstream assets. That gives them money to pay lucrative dividends and invest in growing their businesses.

Enbridge (NYSE: ENB), Enterprise Products Partners (NYSE: EPD), and Kinder Morgan (NYSE: KMI) are among the top options, according to a few Fool.com contributors, for those seeking passive income in the sector. Here's why this trio of midstream companies could help you create years of passive income.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Enbridge: A high yielder that's built to last

Reuben Gregg Brewer (Enbridge): The midstream sector is tied at the hip to oil and natural gas producers. But not every pipeline company is the same, and one notable standout is Enbridge. A key corporate goal is to provide the world with the energy it needs. Today, only around 75% of Enbridge's earnings before interest, taxes, depreciation, and amortization (EBITDA) are linked to oil and natural gas pipelines.

That 75% is a solid core, to be sure, given that Enbridge is one of the largest midstream players in North America. And this foundation has handily supported regular dividend increases, with the annual streak now up to three decades. But long-term dividend investors need to pay particular attention to the other 25% of EBITDA.

The rest of the portfolio is split between regulated natural gas utilities and renewable power investments. Both of these businesses provide reliable cash flows, just like pipelines. However, the utility business tends to provide more consistent opportunities for capital investments, while clean energy investment is expected to grow materially in the years ahead. And both natural gas utilities and renewable power are moving Enbridge in the same "cleaner power" direction as the rest of the world. In other words, Enbridge is preparing today for the energy market of tomorrow.

With a huge 5.8% yield, 30 annual dividend increases, and a business that is changing with the energy needs of the world, Enbridge is the kind of dividend stock you buy and hold for the long term.

These dividends should keep growing

Neha Chamaria (Enterprise Products Partners): Enterprise Products Partners is one of the largest midstream energy companies in the U.S., with a massive pipeline network spanning over 50,000 miles. While its large footprint provides critical energy transportation services to the economy, Enterprise Products has judiciously used capital over the decades to grow its business and reward shareholders while maintaining a strong balance sheet.

Enterprise Products has increased its dividend for 26 consecutive years, and its distributable cash flows (DCF) have covered its dividend payout by at least 1.5 times since 2018. Similar to cash flows from operations, DCF is an important metric for master limited partnerships like Enterprise Products, as they are required to distribute a major portion of their income to shareholders in the form of dividends.

This is a great time to invest in Enterprise Products stock. The midstream giant expects major projects worth $6 billion to come online this year. That's nearly 80% of all major projects under construction. As these projects start contributing to the company's earnings and cash flows, Enterprise Products should be in an even stronger position to not only pay regular dividends but also increase them year after year. With the stock also yielding a hefty 6.8%, Enterprise Products is one of the best midstream stocks to buy to earn years of passive income.

A growing pipeline of projects

Matt DiLallo (Kinder Morgan): Kinder Morgan currently clocks in with a dividend yield approaching 4.5%. That high-yielding payout is on a very sustainable foundation. The natural gas pipeline giant generates very stable cash flow, as 95% comes from highly contracted and predictable sources, like long-term fee-based contracts. Meanwhile, the company pays out less than 45% of its stable cash flows in dividends. That enables it to retain significant excess free cash flow to invest in expanding its operations.

The company has $8.8 billion of growth capital projects in its backlog, primarily natural gas pipeline expansions ($8 billion). It currently has projects underway that it expects will enter commercial service by the end of the decade. That gives it a lot of visibility into its ability to grow its cash flow in the coming years.

Kinder Morgan's backlog has ballooned by more than $5 billion over the past year as it has secured several large-scale natural gas expansion projects. Demand for gas is surging these days, fueled by catalysts like AI data centers, the onshoring of manufacturing, and the electrification of transportation. These drivers should enable Kinder Morgan to continue securing additional expansion projects in the coming years.

The pipeline giant's cash flow should grow briskly over the next several years as its growing backlog of expansion projects enters commercial service. That should enable Kinder Morgan to continue increasing its dividend. The company recently raised its payment for the eighth straight year. Given its high yield and growth visibility, Kinder Morgan can certainly create years of passive income for investors.

Should you invest $1,000 in Enbridge right now?

Before you buy stock in Enbridge, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Enbridge wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $623,685!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $701,781!*

Now, it’s worth noting Stock Advisor’s total average return is 906% — a market-crushing outperformance compared to 164% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

Matt DiLallo has positions in Enbridge, Enterprise Products Partners, and Kinder Morgan. The Motley Fool has positions in and recommends Enbridge and Kinder Morgan. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.