Investors seeking stability in their portfolios tend to carve out room for high-yield dividend stocks. These companies act as a source of regular income and generally have strong businesses that allow them to reward shareholders. 

With various global headwinds like geopolitical tensions and an upcoming U.S. presidential transition, dividend stocks can act as a protective shield against massive market downturns. Evidence of this is the High Dividend Yield Vanguard ETF (VYM) - one of the largest exchange-traded funds focused on high-yield dividend stocks - which is up 17.5% on a year-to-date basis.

The VYM ETF also highlights two energy stocks that have had stellar years in 2024. Analysts remain confident that their growth will continue well into 2025. 

Dividend Stock #1: Kinder Morgan

Founded in 1977, Kinder Morgan (KMI) is a major energy infrastructure company in North America. It focuses on the transportation, storage, and distribution of natural gas (NGF25) and natural gas liquids through a vast network of pipelines and terminals. Its market cap currently stands at $60.2 billion.

KMI stock is up 52% on a YTD basis, and it offers a dividend yield of 4.2% which is above the sector median of 3.3%. Additionally, the company raised its dividend by 2% in the most recent quarter to $0.2875 per share.

The results for the most recent quarter may seem a bit disappointing, with both revenue and earnings failing to surpass estimates. However, there were some encouraging signs. Revenue of $3.7 billion denoted a yearly decline of 5.3%. However, a downturn in operating costs ($2.7 billion vs $2.97 billion in Q3 2023) marked by a decline in cost of sales ($1 billion vs $1.4 billion in Q3 2023), resulted in Kinder Morgan reporting EPS of $0.25, unchanged from the prior year.

Further, the company realized higher prices for its products in the quarter with weighted average oil and natural gas liquids (NGL) prices coming in at $68.42 per barrel of oil (BBL) and $32.38 per BBL compared to $67.60 per BBL and $30.74 per BBL, respectively.

In terms of liquidity, the company fortified its cash balance to $108 million from $83 million at the start of the year as short-term debt levels were lowered to about $2 billion from $4 billion in the same period.

Overall, Kinder Morgan’s extensive natural gas network, which transports about 40% of the natural gas produced in the U.S., positions it to benefit from growing energy demand and the artificial intelligence (AI) boom. Its infrastructure connects all major production basins, and its significant presence on the Gulf Coast enhances its ability to capitalize on increased oil and gas production and exports. As U.S. energy policies emphasize independence and global exports, Kinder Morgan stands to benefit from higher volumes flowing through its network.

Analysts have a consensus rating of “Moderate Buy” for KMI stock with a mean target price of $26.62, which shares have already passed. The high target price of $34 denotes upside potential of about 26% from current levels. Out of 18 analysts covering the stock, 6 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating and 11 have a “Hold” rating.

Dividend Stock #2: Oneok

Founded in 1906 as the Oklahoma Natural Gas Company, Oneok (OKE) has expanded into a leading energy infrastructure firm specializing in the gathering, processing, storage, and transportation of natural gas and NGLs. Its market cap stands at $61.4 billion.

OKE stock has rallied 48% on a YTD basis with the stock offering a dividend yield of 3.77%, which is higher than the sector median.

In the most recent quarter, Oneok reported revenues of $5 billion compared to $4.2 billion in the year-ago period. Further, the company reported EPS of $1.18 which denoted yearly growth of 19.2%. 

Encouragingly, the company reported a 7% increase in natural gas liquid (NGL) feed throughput volumes and a 5% increase in natural gas volumes processed through its Rocky Mountain region. Moreover, major acquisitions in the form of Medallion Midstream and EnLink Midstream are expected to enhance crude and gas pipeline capacities and synergies. 

Medallion’s assets, located primarily in the Permian Basin’s Midland subbasin, focus on crude gathering and transportation. The assets include 1,200 miles of crude oil gathering pipelines with a capacity of 1.3 million barrels per day and 1.5 million barrels of crude oil storage. This acquisition allows ONEOK to diversify its Permian Basin assets, increasing its total crude gathering capacity in the region to around 3.1 million barrels per day. Additionally, the EnLink Midstream deal expands ONEOK’s presence in gas gathering and processing (G&P) and natural gas liquids (NGL) pipelines in Oklahoma and North Texas.

Management projects that these two deals will result in annual synergies of $250 million to $450 million within the next three years. 

Furthermore, ONEOK is positioned to benefit from the growing demand for power distribution driven by data centers and cloud service providers. Executive Vice President Sheridan Swords indicated that ONEOK is in discussions for 23 projects related to sourcing gas for data centers, showcasing the company’s strategic focus on this emerging market.

Taking all of this into account, analysts have attributed a rating of “Moderate Buy” for the stock with a mean target price of $110.33. This indicates upside potential of about 5% from current levels. Out of 17 analysts covering the stock, 9 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating and 6 have a “Hold” rating.