Why I'm Buying These 3 Ultra-High-Yield Dividend Stocks Hand Over Fist for 2025

It's natural that income investors would be attracted to stocks with exceptionally high dividend yields. The higher the yield, the more income they'll receive, assuming the businesses are reliable cash generators.

But I'm not an income investor. So why am I buying three ultra-high-yield dividend stocks hand over fist for 2025? There's a simple explanation.

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Midstream, top tier

In recent weeks, I added to my positions in Enbridge (NYSE: ENB), Energy Transfer (NYSE: ET), and Enterprise Products Partners (NYSE: EPD). The most important common denominator is that all three are leading midstream energy companies -- that is, they're mainly focused on transportation and storage.

Enbridge operates pipelines in the U.S. and Canada, and it's now the largest natural gas utility in North America thanks to acquisitions completed in 2024. Energy Transfer's 130,000-plus miles of pipelines span much of the United States. Enterprise Products Partners has over 50,000 miles of pipeline in the U.S,. plus other assets including natural gas processing trains and fractionators.

Another similarity between these three stocks is their juicy dividends. At recent prices, Enbridge's forward dividend yield stands at 6.5%. Energy Transfer and Enterprise Products Partners are limited partnerships, so they technically pay distributions instead of dividends. Energy Transfer's forward distribution yield is 6.9%, while Enterprise's forward yield is 6.7%.

Two of the three midstream companies have outstanding track records of paying cash to shareholders. Enbridge has increased its dividend for 30 consecutive years. Enterprise Products Partners has increased its distribution for 26. Energy Transfer cut its dividend early in the pandemic, but its growth has resumed since then.

Why these stocks could deliver great total returns in 2025

Energy Transfer has been a big winner this year with a gain of more than 31% at recent prices. Enbridge and Enterprise Products Partners have performed OK, but their gains haven't been as impressive. However, with these stocks, it's more important to look at their total returns rather than only share price appreciation. Their ultra-high dividend yields give them a significant head start in delivering exceptional total returns.

I think the changing political winds in Washington, D.C., will help midstream energy companies quite a bit beginning in 2025. President-elect Trump pledged during the campaign to implement policies that encourage oil and gas producers to "drill, baby, drill." Based on his record during his first term, there's no reason to doubt that he'll fulfill this promise.

Granted, increasing drilling might not be fantastic news for oil and gas producers. The law of supply and demand dictates that when supply increases at a faster rate than demand, prices will fall. "Drill, baby, drill" could mean lower revenue and profits for oil and gas producers.

It's a different story for midstream companies, though. Enbridge, Energy Transfer, and Enterprise Products Partners will make more money as the volumes of oil and gas they transport go up. They're like toll roads. Whether the vehicle is a brand-new $400,000 Italian sports car or a 30-year-old clunker, they pay the same toll. Similarly, midstream companies don't care what the prices of oil and gas are as long as the flow through their pipelines isn't negatively impacted.

Thinking about the longer term

I'll admit that my focus wasn't just on 2025 as I loaded up on these three stocks. I was (and am) thinking about the longer term, too.

While the use of renewable energy sources such as wind and solar will undoubtedly increase over the next several years, I don't think oil and gas production will decline. The U.S. Energy Information Administration predicts that U.S. oil production will rise modestly through 2050 with its baseline scenario. In the agency's most optimistic scenario (for the oil industry, that is), U.S. oil production could increase 48% by 2050 compared to 2022 levels. Realistically, I fully expect business to remain strong for Enbridge, Energy Transfer, and Enterprise Products Partners.

I don't just have the long-term prospects of these midstream energy companies in mind, though; I'm thinking about my long-term financial condition, too. Although I mentioned at the outset that I'm not an income investor now, that will change at some point in the future.

The math is straightforward: $100,000 invested in each of these three stocks will generate more than $20,000 in annual income at their current dividend/distribution levels. Enbridge, Energy Transfer, and Enterprise Products Partners could help make my retirement more comfortable -- one day.