With the markets continuing to exhibit volatility, it's understandable that investors will want the surety of dividends to provide consistent income. With this in mind, let's take a look at why Watsco(NYSE: WSO), Kinder Morgan(NYSE: KMI), Chevron(NYSE: CVX), UPS(NYSE: UPS), and the iShares U.S Infrastructure ETF(NYSEMKT: IFRA) are worth buying for income-seeking investors.
Watsco yielding 3.1%
The hearing, ventilation, and air conditioning (HVAC) parts distributor has been an incredible success story over the last few decades. It demonstrates that you don't have to invest in blue-sky technology stocks to get rich.
It is the leading player in a highly fragmented market, and its "buy and build" business model involves ongoing acquisition-led expansion into new geographies. Watsco buys small distributors and expands their margins by integrating them into its network. With an installed base of 115 million HVAC units in the U.S. Watsco has plenty of long-term growth prospects from distributing equipment and parts to service that equipment.
Image source: Getty Images.
Kinder Morgan yielding 6.3%
The natural gas pipeline company provides investors with a hefty dividend, and its prospects for continuing to pay an attractive dividend continue to look good over the medium term. While there are legitimate question marks around the long-term future due to the clean energy transition negatively impacting long-term demand for fossil fuels, there's no doubt natural gas has a major role to play through the transition -- or, as some would argue, the clean energy addition.
Moreover, there's no guarantee the transition to renewable energy will pan out as many expect it to, and there's an export opportunity in liquefied natural gas (LNG) for Kinder Morgan to profit from. But, all told, it's likely that Kinder Morgan will be able to pay out an attractive dividend for many years, and investors can monitor the gas demand landscape as they enjoy ongoing dividends from the energy infrastructure company.
Chevron yielding 3.6%
The recent news that Saudi Arabia and other OPEC countries (including UAE, Kuwait, and Iraq) would cut oil output to support the price of oil sent a shockwave through the energy markets and prices soaring. At the time of writing, the price of oil was around $81 a barrel compared to around $67 a barrel a few weeks earlier.
The move also highlights the importance of having some energy stocks in your portfolio, and Berkshire Hathaway holding Chevron is an ideal candidate.
Mindful of previous periods of booms and busts in the industry, Chevron's management decided to ramp capital spending conservatively (note how low capital expenditures to revenue are now compared to previous periods of high oil prices). As such, Chevron's cash flow has boomed in recent years, more so than during the last upcycle.
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Meanwhile, Chevron's debt reduction leaves it well placed to deal with oil price declines.
Data by YCharts
UPS yielding 3.4%
Yes, UPS will suffer if the economy slows. Yes, it comes from a period of tremendous growth and difficult comparisons due to the boom in deliveries created by the pandemic. However, the underlying changes that management has made to the business by focusing on growing its small and medium-sized business (SMB) and healthcare markets while being more selective over e-commerce delivery contracts are bearing fruit.
With 2023 likely to prove a tough year, UPS investors can look forward to multiyear expansion in earnings, cash flow, and dividends as UPS continues to expand its business in growth areas while maintaining the discipline to forego less profitable deliveries for the likes of Amazon.com.
Image source: Getty Images.
The iShares U.S. Infrastructure ETF yielding 3.2%
If we are headed for some sort of protracted global slowdown, then it makes sense to look at areas that might receive government support, including U.S. infrastructure. In addition, the $1.2 trillion infrastructure bill has laid the framework for multiyear spending on infrastructure.
The ETF's expense ratio is relatively low at 0.3%, and the fund focuses on railroads, utilities, other owners/operators, and companies that enable infrastructure, such as materials and construction companies.
As such, the ETF gives good exposure to the maintenance and growth of critical infrastructure in the U.S. economy.
10 stocks we like better than Chevron
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com, Berkshire Hathaway, Kinder Morgan, and Watsco. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.
