3 Top High-Yield Stocks to Buy in October

You can always find high yielding stocks in any market environment. But as October rolls around and the market approaches all-time highs, you’ll want to make sure the high-yield stocks you buy are strong and financially sound.

That’s what you get with midstream giant Enbridge (ENB 0.81%)The Dividend King utility The Black Hills (BKH -0.07%)and the integrated energy giant TotalEnergies (TTE 1.06%). Here’s a quick look at each of these high-yielding stocks.

1. Enbridge focuses on reliable cash flow

Enbridge’s core business — operating oil and natural gas pipelines — is a tolling operation. The price of commodities flowing through its vast North American energy infrastructure is less important than demand, as customers pay fees to use the assets. In addition, the company owns a collection of natural gas utility businesses.

These regulated assets are not glamorous, but they are monopolies in the areas they serve and generate a steady (government-controlled) cash flow over time. And the icing on the cake is Enbridge’s small renewable energy division, which is contract-based but shows that management is trying to change with the world as clean energy grows in importance.

Add an investment-grade balance sheet to its stable of reliable businesses, and you can see the appeal Enbridge can have for investors. But the really interesting part of the story is the dividend. The yield is 6.6%, compared to an energy industry average of approximately 3.2%, using Energy Select Sector SPDR ETF as a proxy. Dividends have been increased annually for 29 consecutive years.

2. Black Hills is a dividend king

Even if you look at the utilities sector, you may never have heard of Black Hills due to its modest size (its market cap is only about $4 billion). But this little utility has a pretty attractive deal. It operates in the regions of Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming.

The areas in which they operate are experiencing population growth at about three times the growth of the total US population. More people mean more customers for a regulated utility, and that usually translates into more revenue and higher earnings. Black Hills also has an investment-rated balance sheet.

The real reason Black Hills stands out, however, is its dividend. This small utility has increased its dividend every year for 54 consecutive years, one of the longest such streaks in the utility sector. And that makes Black Hills a high-elite dividend king.

The dividend yield is 4.2%, which is above the average yield of 2.9%, using Utilities Select Sector SPDR ETF as a proxy of the industry.

3. TotalEnergies has an eye on the future of clean energy

TotalEnergies is a globally diversified integrated energy giant with operations spanning oil and natural gas production to energy transportation to chemicals and refining. Compete with an elite group of companies. However, there is one factor that really sets it apart — electricity.

While many of the company’s peers have either stuck with oil and natural gas or made ill-advised efforts to diversify into clean energy, TotalEnergies now generates about 10% of adjusted net income from its integrated power and energy division cleanse.

For investors who believe carbon fuels will remain important for decades, but recognize that clean energy is on the rise, TotalEnergies is a great way to benefit from both trends. And it offers a generous 5.3% dividend yield (well above the energy average of 3.2% mentioned above).

In terms of dividend growth, it doesn’t hold up against some of its peers or the other two stocks on this list. But when oil prices fell in the early days of the coronavirus pandemic, European peers BP and Shell to cut its dividend while highlighting plans to switch to clean energy. TotalEnergies maintained its dividend while announcing the same change.

This is an important statement about the company’s commitment to income-minded shareholders. Remember that as an energy producer, TotalEnergies’ top and bottom results can be volatile at times.

Look beyond yield

There’s no doubt that income investors will find dividend yield to be an important metric. But it’s not the only fact you should consider about a company, especially when the stock market is near all-time highs. If you want attractive income streams and good business in October, you’ll want to look at Enbridge, Black Hills, and TotalEnergies.