3 Ultra-High-Yield Dividend Stocks to Buy for Boatloads of Passive Income

Higher interest rates are making it much easier to find passive income investments. For example, many bonds and bank CDs currently offer yields of around 5%.

However, those attractive passive income streams might not last very long if interest rates fall. On the other hand, many dividend-paying stocks offer attractive income streams they should be able to sustain for the long haul. Energy Transfer (ET -0.16%)Crestwood Equity Partners (CEQP 1.81%), and MPLX (MPLX 0.50%) stand out for their big-time (and sustainable) payouts. That makes them ideal investments for those seeking lots of enduring passive income.

Plenty of fuel to continue growing

Energy Transfer currently yields an eye-popping 9.6%. The master limited partnership (MLP) generates plenty of cash to cover its big-time payout. It produced $2 billion of distributable cash flow in the first quarter, covering its payout with $965 million left over. That gave it enough money to fund its entire growth capital program ($407 million), with plenty of room to spare. This excess cash allowed the midstream company to pay down more debt, pushing its leverage ratio toward the lower end of its target range of 4.0 times to 4.5 times.

The pipeline company recently used its financial flexibility to acquire Lotus Midstream in a nearly $1.5 billion deal. The leverage-neutral transaction will boost its distributable and free cash flow. Energy Transfer also approved a roughly $1.3 billion expansion of its Nederland Terminal, which should come online by mid-2025.

Energy Transfer’s financial strength and growth-related investments give it the confidence to continue increasing its distribution. It recently unveiled a new target to grow the payout by 3% to 5% per year, making it an exceptional option for income-seekers.

Getting even stronger

Crestwood Equity Partners also yields around 9.6%. The MLP supports that big-time payout with solid and improving financial metrics. The company generated enough cash to cover its payout by a comfy 1.5 times during the first quarter. Meanwhile, leverage is around 4.0 times after recently selling its natural gas storage assets.

The midstream company expects to generate enough cash this year to cover its distribution and capital spending ($135 million to $155 million in growth projects), with about $10 million to $90 million to spare. That free cash flow will enable the company to pay off more debt, further strengthening its balance sheet. Crestwood is targeting to get leverage down to less than 3.5 times in the future.

Once leverage reaches that target, the MLP will have the financial flexibility to return more cash to investors. It could increase its distribution and repurchase common or preferred units. Meanwhile, its improving financial flexibility will enable Crestwood to continue executing its midstream consolidation strategy, which should drive growth over the long term.

Rock-solid with more growth coming down the pipeline

MPLX currently yields 9.1%. The MLP also supports its ultra-high-yielding distribution with a strong financial profile. The company generated enough cash in the first quarter to cover its payout by a comfortable 1.6 times. Meanwhile, leverage was down to 3.5 times, well below its 4.0 times target.

The company’s retained cash and balance sheet flexibility give it the funds to continue expanding its midstream operations. MPLX is investing capital in expanding its natural gas long-haul and crude oil gathering pipelines in the Permian and Bakken basins. It’s also building a couple of new natural gas processing plants. These expansion projects will increase MPLX’s cash flow as they come online over the next year.

That will give the company more fuel to increase its distribution. MPLX has raised its payout every year since its formation in 2012.

Passive income that can endure

Energy Transfer, Crestwood Equity Partners, and MPLX offer ultra-high-yielding distributions they back with rock-solid financial profiles. That gives them the financial flexibility to continue expanding. Because of that, these companies should be able to sustain (and grow) their big-time payouts over the long term. That makes them ideal for investors seeking passive income that can last even when interest rates eventually start descending.

Matthew DiLallo has positions in Crestwood Equity Partners and Energy Transfer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.