Chevron (NYSE:CVX) just signed a landmark deal to significantly expand its operations in Venezuela. The agreement, which positions the oil giant to double its output over the next five years, is a testament to its patience. "You have to hang in there until all the conditions come together: the technology, the economics, the markets, the politics," stated CEO Mike Wirth in a recent interview with Bloomberg. It stayed long after rivals ExxonMobil (NYSE:XOM) and ConocoPhillips (NYSE:COP) left, putting it in a position to capitalize on this major opportunity to help revitalize Venezuela's oil industry.

Here's a look at how Chevron's patience has proven to be a significant competitive advantage in Venezuela.

Image source: Getty Images.

Staying when things got tough

ExxonMobil and ConocoPhillips both left Venezuela in 2007 after the country nationalized their assets. Both have been seeking restitution, with ConocoPhillips winning an arbitration award of $12 billion that it has been trying to recover for years. The oil companies have been considering a return this year, as they each sent technical teams to evaluate potential investment opportunities. While ExxonMobil CEO Darren Woods called Venezuela "uninvestable" this past January, President Trump recently said that Exxon would be going back into Venezuela.

However, both companies are far behind Chevron, which has maintained operations in the country for over 100 years. That's part of the company's patient strategy in the country. CEO Mike Wirth told Bloomberg: "You have to have some patience and look at this out over time and not become discouraged. Not pick up and leave when things are difficult." By hanging on during the tough times, which included dealing with hyperinflation, power outages, and unstable civil conditions, Chevron was able to pounce when the opportunity came around to participate in the revival of Venezuela's oil industry.

Building on its legacy

Chevron has already been expanding its operations in Venezuela. In April, it consolidated its heavy-oil position in the country through an asset swap with Venezuela's national oil company, Petroleos de Venezuela, S. A. (PDVSA). It received an additional 13.21% working interest in Petroindependencia, increasing its stake in that joint venture (JV) to 49%. Additionally, its Petropiar JV (30% interest) was granted rights to develop the adjacent Ayacucho 8 area in the Orinoco Oil Belt. In exchange, Chevron gave up its interest in two gas licenses and in another non-operated joint venture. This trade enhances Chevron's ability to increase production by 50% by the end of 2028, from its recent rate of 280,000 barrels per day.

Now, Chevron is further building on this legacy position with additional enhancements to its JVs. Its new deal with Venezuela will provide it with more acreage in the Orinoco Belt. Petroindependencia received the rights to develop the adjacent Carabobo-1 and Carabobo-2-South-A areas. Additionally, the deal includes enhanced fiscal, commercial, and legal terms that will support durable, competitive long-term investments in the country. Improved financial terms are something ExxonMobil has been seeking before it would agree to reenter the country.

This increased position and improved terms support Chevron's new plan to invest more than $7 billion over the next five years. That would enable the company to more than double its production to around 600,000 barrels per day. Chevron estimates that its costs will be less than $20 a barrel, positioning it to drive strong earnings growth over the next five years from this investment.

However, while Wirth told Bloomberg that it has "good, high-quality resource positions" in Venezuela, "They're also sometimes not the easiest resource to produce." That's a risk investors should keep an eye on as the oil company ramps up its investment rate in the country. There's also the potential for renewed political risks, both in Venezuela and from future elections in the U.S.

Chevron's patience could pay massive dividends

Chevron's decision to remain in Venezuela during the tough times is paying off. Its existing joint ventures in the country are receiving additional resources, which, together with improved terms, will enable the company to significantly increase production over the next five years. Given its low-cost resources, it could generate meaningful cash flow growth. It now has a huge head start over Exxon and ConocoPhillips, both of which are still evaluating whether to reenter the country. That could benefit the oil stock in the long run, as its low-cost growth in Venezuela could give it the fuel to deliver higher total returns than its rivals over the next few years.

Matt DiLallo has positions in Chevron and ConocoPhillips. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.

Fed Chair Kevin Warsh recently rattled investors. His comments at Jackson Hole on Aug. 28 caused the odds of a rate hike to rise. If you've owned high-yielding dividend stocks for any length of time, you're probably getting a little bit nervous because rate hikes tend to negatively impact these investments.

While higher rates are more challenging for some high-yielding dividend stocks, others stand to benefit. Here's a look at the potential losers and winners if the Fed hikes rates.

Image source: Official Federal Reserve Photo.

Higher probability of higher rates

Warsh didn't sugarcoat things at the Jackson Hole meeting at the end of August. While he acknowledged that the inflation rate has slowed a bit, the underlying trends haven't improved enough. If they don't start getting meaningfully better, the Fed will need to act.

The market immediately reacted to these comments. Traders of fed fund futures priced in a 60.4% probability that the Fed will deliver a 25-basis-point hike on Sept. 16. That's up from 56% before Warsh's comments. Some Fed watchers are already assuming two rate hikes this year, with Deutsche Bank expecting quarter-point raises at both the September and December meetings.

Higher rates are bad news for most high-yield dividend stocks

High-yield dividend stocks tend to fall at the hint of higher rates. That's because interest rate increases have two real impacts on these investments. Many higher-yielding companies are heavily reliant on debt. Higher rates make it more expensive to borrow money to fund expansion investments (acquisitions and capital projects) and to refinance existing debt as it matures. Additionally, rising interest rates make lower-risk fixed-income investments like bank CDs and government bonds more attractive to income-seeking investors. As a result, the share prices of high-yielding stocks tend to fall, causing their dividend yields to rise to compensate investors for their higher risk profiles.

Real estate investment trusts (REITs) are among the most rate-sensitive investments. REITs borrow heavily to fund acquisitions and development projects, which helps grow their funds from operations and dividends. Higher rates could stunt their growth, making it harder for them to increase their dividends.

Meanwhile, mortgage REITs like AGNC Investment (NASDAQ:AGNC) are among the most rate-sensitive REITs. AGNC invests in Agency MBS, pools of residential mortgages that are protected against credit losses by government agencies. It uses leverage to boost the returns of these low-risk, fixed-income investments. As a result, its borrowing costs would rise if interest rates increased, narrowing the spread between its costs and income. That could put its 13.5%-yielding monthly dividend at risk.

The energy sector is another place that tends to be highly rate-sensitive. Utilities and pipeline companies operate capital-intensive businesses that require heavy borrowing. Meanwhile, they tend to have higher-yielding dividends, making them susceptible to competition from bonds when rates rise.

Potential winners if rates rise

Not all high-yielding dividend stocks would lose if rates rose. Some business development companies (BDCs) and REITs invest in floating-rate loans. As a result, the interest they earn on these loans would rise if rates increased.

For example, leading BDC Ares Capital (NASDAQ:ARCC) has 71% of its $29.3 billion investment portfolio in floating-rate debt. As a result, the already high yields it earns on its direct loans (10.3% weighted-average yield) would increase as rates rise. While Ares does carry some floating-rate debt on its balance sheet, its ability to capture higher rates on its floating-rate debt investments will help cushion the impact.

Meanwhile, not all mortgage REITs are at risk. Commercial lender Starwood Property Trust (NYSE:STWD) has a predominantly floating-rate loan portfolio. Its commercial lending portfolio (53% of its assets) consists of 97% floating-rate loans. Meanwhile, its infrastructure lending portfolio (9%) is 96% floating rate. Starwood constructed its portfolio to outperform in both higher- and lower-interest rate environments.

Rate hikes aren't all bad news for dividend investors

It's not yet confirmed whether the Fed will hike interest rates this year. However, that doesn't mean worries about a potential rate hike won't weigh on the share prices of higher-yielding dividend stocks. That decline could be a buying opportunity for investors, especially for names like Ares Capital and Starwood, as they could benefit if the Fed hikes rates, given their emphasis on investing in floating-rate debt.

Matt DiLallo has positions in Ares Capital and Starwood Property Trust. The Motley Fool has positions in and recommends Ares Capital and Starwood Property Trust. The Motley Fool has a disclosure policy.

Vici Properties (NYSE: VICI) is at it again. The owner of market-leading gaming, hospitality, wellness, entertainment, and leisure destinations is raising its dividend by another 2.2%, bringing the annualized payment to $1.84 per share. The real estate investment trust (REIT) has now raised its payout every year since going public in 2018. Its latest raise will boost its already leading dividend yield, which, at its recent closing share price of $25.65, now stands at 7.2%. That's the highest dividend yield in the S&P 500.

Here's how this high-dividend REIT can afford to continue raising its payment.

Image source: Getty Images.

Backed by a world-class portfolio

Vici Properties currently owns over 100 experiential properties leased to 16 tenants. While 70% of its rent comes from only two tenants, they include some of the most iconic gaming properties on the Las Vegas Strip.

The REIT leases its properties under triple-net leases with a weighted-average remaining term of nearly 40 years. Its leases feature strong protections, including inflation-linked rental rate increases (45% this year, rising to 87% by 2035). In addition to its owned real estate portfolio, Vici Properties has a growing real estate-backed loan portfolio (nearly $4.3 billion of total commitments at a 9.2% blended interest rate). While these aren't risk-free investments, they should provide the REIT with very stable income to support its high-yielding dividend.

At its recently raised dividend rate, Vici Properties' payout ratio will be around 75% of its estimated adjusted funds from operations, at the low end of its 2026 guidance range. That will enable it to retain nearly $700 million in cash to fund new investments. The REIT also has a rock-solid investment-grade balance sheet, with leverage currently at the low end of its 5.0x-5.5x target range. That's providing it with the financial flexibility to make new investments to support its dividend. It recently closed a $1.2 billion sale-leaseback transaction, adding seven new casino properties, and acquired a beach resort in a $75.5 million build-to-suit redevelopment deal.

These and future new investments should support continued dividend growth, making it an attractive high-yield stock to buy.

Matt DiLallo has positions in Vici Properties. The Motley Fool recommends Vici Properties. The Motley Fool has a disclosure policy.

Shares of Ares Capital (NASDAQ:ARCC) have fallen about 10% from their 52-week high ($22.51) to their current level of around $20 per share. That has pushed its dividend yield up near 10% (recently around 9.6%). Several factors have driven the slump, including rising interest rates, Ares' falling core earnings, and an uptick in non-accruals. That last number worries me a bit because it relies on receiving interest payments to pay its high-yielding dividend.

While the trend in non-accruals is concerning, it's not a major red flag yet, just something I plan to keep an eye on. Here's why it wouldn't make me sell the high-yielding business development company (BDC) stock just yet.

Image source: Getty Images.

Why a rise in non-accruals is slightly worrisome

Ares Capital noted in its second-quarter report that loans on non-accrual status represented 2.4% of its total investments at amortized cost (or 1.4% at fair value). That's up from 2.1% after the company added four loans to the non-accrual list during the quarter. That's a concern because a rise in non-accrual loans can indicate early stress in an underlying loan portfolio. If this trend continues, it could put the dividend at risk.

On a more positive note, the company highlighted on the quarterly conference call that these four new non-accrual loans were from companies operating in different industries and were unrelated to one another. CEO Kort Schnabel commented on the call that "We are not able to discern any trends yet around certain industries that are experiencing any kind of outsized weakness or leading us down this path toward more credit normalization."

Meanwhile, President Jim Miller highlighted on the call that its non-accrual rate was still below its historical average of 3% since the global financial crisis. Further, it remains well below the historical average of BDCs, which has been around 4% during this time frame. However, Miller did repeat his warning on the call that while the company has been operating in an extended period of lower non-accrual rates and defaults, "we think there is a reversion toward the mean there." This suggests this concerning trend will continue.

Why I'm not concerned enough to sell

While a rising non-accrual rate is somewhat troubling, Ares Capital has a strong track record of navigating the ebbs and flows of the credit market. It's the biggest BDC with a $29.3 billion investment portfolio spread across 619 portfolio companies. Its top 10 investments represent 10.5% of its portfolio at fair value, more than half the concentration of its BDC peers (22.2%). That diversification helps reduce risk. Further, it has an excellent investment record. Throughout its 21-year history, realized gains have outpaced losses by over $1 billion, averaging about 1% per year. That has helped support its 17-year track record of delivering a stable-to-growing dividend.

Those gains have given it a bigger cushion to support its dividend than its core earnings suggest. Ares Capital's core earnings of $0.94 per share through the first half of this year were down from $1.00 per share in the year-ago period. That put them below its dividend payments of $0.96 per share. However, it has recorded an additional $0.15 per share of net realized gains over the last 12 months, providing further support for the dividend. That has added to the gains it has banked over the years. It currently has $1.38 per share of taxable spillover income it carried forward from last year for distribution in future periods.

Here's what would worry me enough to sell

While this quarter's uptick in non-accruals is slightly troublesome, I'm not concerned enough to sell. It's still below the company's historical average. Further, Ares has a strong record of delivering realized gains, which has supported 17 years of dividend stability. That's why I'd continue to buy shares of Ares Capital for its high-yielding dividend. It's still a relatively small position for me, and I'd like to continue building it to grow my passive income.

However, what would really start worrying me is if its non-accruals surpass its historical average. That would likely lead to a larger dip in core earnings and require the company to use more of its cushion. If the dividend ever looked at risk, I'd consider selling Ares and reinvesting the proceeds into a higher-quality, high-yielding dividend stock.

Matt DiLallo has positions in Ares Capital. The Motley Fool has positions in and recommends Ares Capital. The Motley Fool has a disclosure policy.

I'll be honest, I'm a bit of a value investor at heart. So, when I see rumors that AI start-up Anthropic is potentially targeting a $2 trillion IPO valuation, I get a little bit squeamish. That would value the developer of the Claude AI chatbot at 30 times revenue. That's quite pricy for someone who views a stock trading at 30 times earnings as expensive.

Despite that sky-high valuation, I'm still interested in investing in Anthropic when it goes public. While I probably won't buy IPO shares, I'd pounce if it follows the path of most big IPOs and subsequently falls after an IPO pop.

Image source: Getty Images.

The staggering valuation

Anthropic hasn't priced its IPO yet. However, I've seen a couple of reports suggesting it's targeting a $2 trillion valuation, which would put it ahead of the $1.8 trillion valuation at which SpaceX (NASDAQ:SPCX) priced its IPO this past June.

The AI start-up reported last month that its annualized revenue run rate reached $65 billion at the end of July. That would value it at 30 times revenue. That's actually not bad when you consider that SpaceX went public at 100 times sales. SpaceX has gotten cheaper since then, as it currently trades at over 42 times revenue, even though it was recently trading above its IPO price due to blistering revenue growth (92% year-over-year in the second quarter). It's also less than some other notable public traded tech companies (Palantir trades at over 50 times sales, while Cloudflare fetches more than 40 times revenue).

However, the problem with high-valued IPOs is that most don't usually live up to the initial hype. According to data from FactSet, only nine of the 36 companies with market caps over $15 billion to go public on major U.S. exchanges have outperformed the S&P 500 since their IPO. Factors such as not growing as quickly as expected and the expiration of post-IPO lockups have contributed to their lackluster performance.

Why I'm still interested in Anthropic

Despite its likely lofty IPO valuation, I'm very intrigued by Anthropic. It's growing remarkably fast. Its annual revenue run rate was only about $9 billion at the end of 2025. Its $65 billion annual revenue run rate at the end of July was a staggering ninefold increase from a year ago. That blistering growth enabled Anthropic to report an operating profit in the second quarter, the first in its history. For comparison, SpaceX posted a $541 million net loss in the second quarter.

Anthropic is still in the early stages of its growth. The company projects 2028 revenue of $190 billion to $200 billion, roughly triple July's annualized level. That would put its $2 trillion rumored valuation at "only" 10 times 2028 revenue. Meanwhile, Anthropic believes its potential revenue exceeds $30 trillion, surpassing the $26.5 trillion estimate SpaceX puts on xAI's market opportunity. However, those are pie-in-the-sky numbers, as neither company will capture 100% of the AI opportunity. Further, the combined total revenue of all publicly traded tech companies was less than $2.5 trillion last year.

Still, I've seen the immense potential of Anthropic's Claude firsthand. While I'm concerned about the impact AI will have on my profession as a writer, I've started embracing it to help improve my workflow. I don't say this lightly, but Claude has been a game changer for me personally and professionally. I've used it to develop better headlines (it helped me craft the one for this article), analyze data to improve content production, and devise my personalized retirement strategy. While it has its flaws, it has become an indispensable tool for me.

How I plan to play the Anthropic IPO

I learned a costly lesson with SpaceX. I had a vague plan to buy shares after its IPO on a pullback, which came and went because I never set a target price. I don't plan on repeating that mistake with Anthropic. I will develop an action plan before it goes public with a target buy price based on the most up-to-date information. On the one hand, I don't want to get caught up in the IPO hype, especially considering my personal affection for Claude. However, I also don't want to miss a chance to buy shares at a reasonable valuation. That's why I plan to watch closely as Anthropic's IPO plays out.

Matt DiLallo has positions in Cloudflare and FactSet Research Systems. The Motley Fool has positions in and recommends Cloudflare, FactSet Research Systems, and Palantir Technologies. The Motley Fool has a disclosure policy.

VICI Properties (NYSE: VICI) currently owns 103 properties leased to 16 tenants, which underpins its 7%-yielding dividend. However, its top tenant accounts for 38% of its rent, while its next-largest tenant accounts for another 32%. That's 70% of its rent coming from just two tenants.

Despite that tenant concentration, I'm not worried about the real estate investment trust's (REIT) high-yielding dividend. Here's why.

Image source: Getty Images.

Why is this REIT so concentrated at the top?

VICI Properties formed in October 2017 as part of an agreement with Caesars Entertainment and its creditors, under which much of the casino operator's debt converted into ownership of most of the real estate it occupied. At the time, the REIT had 19 properties and a single tenant.

The landlord has significantly expanded and diversified its portfolio since its formation. The biggest single transformational move came in 2021 when it agreed to acquire fellow gaming REIT MGM Growth Properties in a $17.2 billion deal. That REIT formed in 2015 after casino operator MGM Resorts International spun off its real estate assets (15 properties) to create a new REIT. That deal reduced VICI Properties' tenant concentration from 84% Caesers' to 41%, while expanding its portfolio from 28 gaming properties to 43.

The REIT further reduced its tenant concentration and diversified its portfolio beyond gaming in 2023, when it acquired 38 bowling entertainment centers in a $432.9 million sale-leaseback transaction with Bowlero (now Lucky Strike Entertainment). It has added several additional gaming and non-gaming tenants to its roster over the years.

Here's why I'm not concerned about its tenant concentration

VICI Properties doesn't own commodity real estate like convenience stores or warehouses. It owns market-leading gaming, hospitality, entertainment, wellness, and leisure destinations. Its portfolio features some of the most iconic properties on the Las Vegas Strip, including Caesars Palace Las Vegas and MGM Grand. The properties have multiple revenue streams, including hotel rooms, gaming space, meeting and convention space, food and beverage outlets, entertainment venues, and retail outlets. As a result, even if the current tenant ran into financial issues, it could easily lease these properties to a new operating tenant.

Additionally, VICI Properties is steadily diversifying its tenant base and portfolio. During the second quarter, it added Golden Entertainment to its roster (15th tenant) through a $1.2 billion sale-leaseback transaction. It's now the REIT's fifth-largest tenant, accounting for 3% of its rent. It also signed a build-to-suit transaction with Club Med, under which it acquired a beach resort in St. Croix for $20.3 million and leased it back to Club Med (its 16th tenant). VICI Properties also plans to invest $55.2 million to redevelop the property.

It has also invested over $4.2 billion into loans and other securities backed by experiential real estate with industry-leading operators, including Great Wolf Lodge, Canyon Ranch, and Cabot. These investments currently contribute about 8% of its total income, further reducing its overall income concentration. Many of these investments include the option to acquire the underlying real estate in the future, which would further diversify its rent roll and portfolio.

Secured by a strong portfolio

VICI Properties gets 70% of its rent from just two tenants, which is very high. However, they're operating world-class properties with diversified revenue streams to help cover those rental payments. Further, the REIT is steadily diversifying its portfolio by operator and property type. These factors drive my confidence in the safety of its 7%-yielding dividend.

Matt DiLallo has positions in Vici Properties. The Motley Fool recommends Vici Properties. The Motley Fool has a disclosure policy.

One of the biggest challenges facing AI data center developers isn't getting the chips that will serve as the digital brain of these facilities. It's securing the power needed to keep those chips running at full capacity. That's why Vertiv (NYSE:VRT) is spending up to $2.6 billion to acquire Utility Innovations. The deal will help it address the "time to power" problem and reduce time-to-revenue for companies that utilize these facilities.

Here's a look at the deal and how it will help solve the biggest bottleneck slowing down AI data center development.

Image source: Getty Images.

Details on the deal

Vertiv, which makes the equipment that keeps data centers running (power and cooling), is expanding outside the shell. It's acquiring Utility Innovations, a leader in microgrid solutions, advanced power controls, and behind-the-meter power architecture design for data centers. It's paying $1.45 billion in cash at closing, with an additional consideration of up to $1.15 billion based on achieving certain earnings targets over the next 12- and 24-month periods. Vertiv expects that the deal will be accretive to its earnings in the first year after closing.

The acquisition strategically extends the company's capabilities upstream to grid interconnect, adding microgrid controls, on-site generation, energy storage orchestration, and behind-the-meter power architecture. Adding these capabilities will enable Vertiv to help data center developers secure power more quickly, accelerating their ability to monetize these facilities. Vertiv will now cover the full power value chain, from the grid to the chip.

Accelerating "time to token"

Access to power has become the dominate issue for data center developers. "For AI data center operators, competitive advantage increasingly depends on how quickly they can move from site selection to first token," stated CEO Gio Albertazzi in the press release announcing the deal. That's leading more developers to bring their own power when the grid interconnect will take too long. Vertiv will be part of this solution, as Utility Innovations will add to its on-site power capabilities, including microgrid design and delivery, behind-the-meter power architecture design, and energy storage.

The need for speed has been a catalyst for the accelerating growth in demand for Bloom Energy's (NYSE:BE)fuel cells. Last year, it collaborated with Oracle to deliver power to data centers at the speed of AI, with an initial target of delivering onsite power for an entire data center in 90 days. Bloom delivered a fully operational fuel cell system in just 55 days, leading Oracle to significantly expand its partnership. Bloom's ability to quickly power data centers is driving blistering growth (100% revenue growth expected in 2026).

While Vertiv isn't growing quite as fast, it expects to deliver 31% sales growth this year at the midpoint of its guidance range and a 72% surge in earnings per share. The Utility Innovations deal should help power continued robust growth in 2027 and beyond.

An AI power name to know

Vertiv isn't the first name investors probably think about when evaluating AI investments. However, its power and cooling equipment are crucial to keeping the AI chips inside data centers powered, cooled, and running without interruption. It's now expanding beyond the shell to support the electrical interconnection between the building and the power source. That makes it an even more compelling opportunity for those seeking to invest in the AI power story.

Matt DiLallo has positions in Bloom Energy and Vertiv and has the following options: long September 2026 $180 puts on Vertiv, short October 2026 $150 puts on Bloom Energy, and short September 2026 $220 puts on Vertiv. The Motley Fool has positions in and recommends Bloom Energy, Oracle, and Vertiv. The Motley Fool has a disclosure policy.

Being correct about a stock isn't the same thing as cashing in on that thesis. I just learned that the hard way with SpaceX (NASDAQ:SPCX). I refused to buy into its pre-IPO hype, which led me to predict back in June that SpaceX would eventually drop below its IPO price of $135 per share. I nailed that prediction, as SpaceX stock fell to a low of $104.83 per share shortly after it went public. Unfortunately for me, I didn't buy any shares after they dropped. I missed out, as SpaceX has since recovered, recently topping $143 per share and surpassing its IPO price.

Here's the lesson I learned about the costly gap between being right and acting, and how I plan to change my strategy when Anthropic goes public.

Image source: The Motley Fool.

My original thesis

I wrote about my potential interest in buying SpaceX stock after its IPO right before it went public in June. It was about to complete the biggest IPO in history, raising $75 billion in a deal valuing the Elon Musk-led space and AI start-up at almost $1.8 trillion. The mega IPO valued the company at an eye-popping 100 times revenue. I noted that this had it trading at a much higher multiple than Musk's other company, Tesla, which went public at 15 times sales, and was trading just under that level when SpaceX went public.

I further highlighted FactSet data showing the historical underperformance of large IPOs. It showed that only nine of the 36 companies with market caps above $15 billion that have completed IPOs on major U.S. exchanges have outperformed the S&P 500 since their IPOs. Contributing factors included failing to live up to their initial growth hype and an increase in the number of available shares after IPO lockup periods expired. Considering SpaceX's sky-high valuation, I thought there was a high probability that it would trade below its IPO price in the next year, which would allow me to buy shares at a lower price.

That dip came even faster than I anticipated. SpaceX stock began to slide shortly after its post-IPO pop, hitting a low of $104.83 per share on Aug. 3. Despite my stated intention of waiting for a post-IPO pullback, I didn't buy one share.

Why "waiting for a dip" wasn't the correct strategy

I had a very sound thesis for SpaceX's IPO. What I lacked was an actionable strategy. This isn't just hindsight bias. While I said I wanted to wait for a lower price, I never set a trigger price. As a result, I didn't have a condition to act when the price dipped. So, the dip came and went, without any action, causing me to miss the rebound.

What I should have done was set a price target, specific valuation multiple, or percentage decline. That would have given me a decision point. If SpaceX dropped to my target, I could have either bought the stock or set a new target based on new information. That way, I'm not looking back at what now appears to be a missed opportunity.

However, every missed opportunity is a chance for improvement. I plan to improve my strategy so I don't make the same mistake with future IPOs, especially Anthropic, which I'm even more excited about. The AI start-up could go public at an even bigger $2 trillion valuation, which is hard to justify. However, I won't want to miss the opportunity to buy shares if they drop to a more reasonable level, so I plan to set a target purchase price for a post-IPO pullback.

Being right was still the wrong call

I correctly called the post-IPO pullback in SpaceX stock. However, I went about that prediction the wrong way. I never set the price I was willing to buy. That's why it seems like I missed out since SpaceX stock dipped and has now recovered. If it had never dipped to my target price, I could have anchored to that thesis and not felt like I missed my opportunity. That's a mistake I don't plan on repeating with Anthropic. I plan to set a target price at which I'd buy shares of the AI start-up if it follows SpaceX's path with a post-IPO dip of its own.

Matt DiLallo has positions in FactSet Research Systems and Tesla. The Motley Fool has positions in and recommends FactSet Research Systems and Tesla. The Motley Fool has a disclosure policy.

Holtec Nuclear Corporation recently filed for an initial public offering, planning to list on the Nasdaq stock exchange under the ticker HNUC. Here's why that IPO should worry Oklo (NYSE: OKLO) investors. Holtec has something Oklo lacks: revenue and earnings. That should make it a more appealing alternative for investors seeking exposure to the nuclear renaissance in the U.S.

Here's a look at this upcoming nuclear energy stock and how it differs from investing in Oklo.

Image source: The Motley Fool.

Introducing Holtec Nuclear

Unlike Oklo, Holtec isn't a pre-commercial nuclear start-up. It has been around since 1986 and currently supplies nuclear equipment, manages spent nuclear fuel, and, like Oklo, develops small modular reactors (SMRs). Its core business of nuclear fuel and waste management funds its current operations. The company generated $165 million of revenue and $17.8 million of net income during the first three months of this year. While that was down from $177.7 million in revenue and $25.4 million in net income in the prior-year period, it's an already-functioning commercial business that supports its growth initiatives, including its SMR program.

Holtec is leading the restart of the 800-megawatt Palisades nuclear plant in Michigan, which shut down in 2022 after 50 years of operation. Additionally, it plans to build two SMR-300s at that site. It has already received $400 million from the U.S. Department of Energy to support its development plans at this site. Holtec aims to use its IPO proceeds to further its SMR program, expand its manufacturing capacity, and support its other growth initiatives. It has several planned SMR sites beyond Palisades, including at the decommissioned Oyster Creek nuclear power plant in New Jersey, where it plans to deploy four SMR-300s.

Why Holtec's IPO should worry Oklo investors

Now let's contrast Holtec's business model with Oklo. The SMR start-up generated a mere $1.2 million in revenue during the second quarter. It didn't record any revenue during the first quarter or during the first six months of last year. Meanwhile, it has been piling up losses. Its net loss totaled $48.5 million in the second quarter and $81.6 million year-to-date. Oklo is a long way from generating meaningful revenue, as it likely won't book its first commercial power revenue before 2028.

Oklo is still in the early stages of building a scalable, vertically integrated nuclear platform from the ground up, including power, fuel, and isotopes. That's expensive. It spent $126.9 million on capex in the first half of this year and an additional $25.7 million on acquisitions to expand its capabilities. That's on top of the $65.5 million in cash it used in operating activities. The company does have some breathing room, as it ended the second quarter with $3 billion of cash and marketable securities after issuing $1.9 billion of stock through its at-the-market program. However, continued cash burn is something Oklo investors will need to monitor until it begins generating meaningful revenue to fund its operations and expansion initiatives.

New competition for investors

Holtec's upcoming IPO doesn't diminish the investment thesis for Oklo. The SMR start-up is building an integrated platform from the ground up, which has high risks but high reward potential. However, it will add a new, lower-risk option for investors looking to play the nuclear renaissance. As a result, it could take a lot longer for Oklo's stock to recover from the more than 75% plunge from its peak.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The Metals Company (NASDAQ: TMC) conducted two studies to determine the resource potential of its exploration license areas in the Clarion Clipperton Zone (CCZ) in the Pacific Ocean. They found that it's sitting on 1.6 billion tonnes of potential resources, with a combined net present value (NPV) of $23.6 billion. Despite that massive resource base, The Metals Company currently has an enterprise value of around $2.1 billion, implying it trades at a fraction of its resources' projected value.

Here's why the market isn't currently valuing this metal stock anywhere near the full value of its resource potential.

Image source: Getty Images.

Drilling down into its resource potential

The Metals Company holds exclusive rights to explore and extract polymetallic nodules (pending permits) from license areas in the CCZ. These nodules are small rock formations, about the size of potatoes, lying on the seafloor. They contain nickel, copper, cobalt, and manganese, critical metals used in electric vehicle batteries and stainless steel.

It conducted a world-first pre-feasibility study of one specific sub-section of its license, which confirmed a resource base of 363 million tonnes. These resources have an NPV of $5.5 billion at a 27% internal rate of return (IRR), assuming a capital-light development approach. Additionally, it conducted a less rigorous initial assessment of its other license areas. They contained nearly 1.3 billion tonnes of resources, yielding an NPV of $18.1 billion at a 36% IRR, assuming a contracted development approach.

Why the market isn't fully buying into its resource potential

The Metals Company currently trades at about 8% of its SEC-compliant $23.6 billion NPV. Its management team believes it's highly undervalued relative to the 58% average discount applied to companies exploring for and developing nickel resources.

There are two reasons for this major disconnect. First, The Metals Company is doing something no other company has ever done before. It's trying to extract polymetallic nodules from the ocean floor and is currently seeking a permit to begin extraction. However, it's seeking approval from the National Oceanic and Atmospheric Administration (NOAA) rather than the International Seabed Authority. This move could cause international issues due to intense environmental opposition. Even if it receives a permit from NOAA, the company might still lack the legal authorization to proceed with extraction.

The other issue is its financial situation. The Metals Company ended the second quarter with about $143 million in liquidity. Its cash burn rate was $20.1 million in the second quarter, raising a potential future funding issue. It's currently seeking additional funding from the U.S. Government to build nodule-processing and refining capacity in the country.

Risks are weighing it down

The Metals Company is sitting on a potentially massive resource in the Pacific Ocean. If it wins legitimate approval to extract these highly valuable polymetallic nodules, its stock has significant upside potential as the valuation discount narrows. However, there's a real risk that even if it received a permit from NOAA, it won't be able to proceed with extraction. That sets it up for a potentially expensive legal battle, not to mention the costs of continuing to operate and develop its processing and refining capacity once it finally receives all the necessary approvals. These risk factors are why The Metals Company will likely continue to trade at a meaningful discount to its resource potential.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Energy stocks are a go-to source for many investors seeking dividend income. The trailing 12-month yield of energy stocks in the S&P 500 is currently over 4%, more than three times higher than the index's overall average of around 1%. However, yields vary within the energy sector. Right now, midstream companies pay better than big oil.

Here's a look at the differing yields and growth profiles of each side of the barrel.

Image source: Getty Images.

Big oil can pay big dividends

ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) are two of the world's largest oil companies. They're also leading dividend stocks. Exxon has increased its payment for 43 straight years (fewer than 5% of S&P 500 companies have achieved this), while Chevron has 39 years of annual dividend increases under its belt. Both oil stocks currently offer above-average dividend yields: Chevron's is around 3.5%, while ExxonMobil's is over 2.5%.

The oil giants are in a strong position to continue growing their dividends. Exxon's 2030 plan would see it deliver 13% earnings growth and double-digit cash flow growth, with even higher per-share growth driven by its share repurchase program, assuming constant margins and pricing relative to 2024. Meanwhile, Chevron expects to deliver more than 10% annual free cash flow growth through 2030, assuming oil averages $70 a barrel. Both companies are working to enhance their strategies. Exxon is bidding on Shell's U.S. chemicals assets while Chevron is looking to expand into Iraq. They should have plenty of fuel to continue increasing their high-yielding dividends.

The midstream side of the barrel can pay even better

Most energy midstream companies currently offer even higher yields than those big oil giants. For example, Enterprise Products Partners (NYSE: EPD) currently yields around 5.8%, while Enbridge (NYSE: ENB) yields slightly less at 5.5%. Others in the sector have lower yields, with Williams and Kinder Morgan closer to Exxon and Chevron's range at 2.8% and 3.7%, respectively. Tax complexity can contribute to the higher yields offered by some midstream companies, as Enterprise is a master limited partnership (MLP), while Enbridge is a Canadian corporation.

Many midstream companies have strong dividend growth records. Enbridge has increased its dividend for 31 straight years (in Canadian dollars), while Enterprise has raised its distribution for 28 consecutive years. Both companies should have the fuel to continue growing their payouts. Enterprise currently has $6.5 billion of major capital projects under construction that should enter service through early 2029. Meanwhile, Enbridge has a massive 41 billion Canadian dollars ($29.6 billion) in secured projects in its backlog that it expects to finish through the early 2030s. It recently enhanced its strategy by purchasing Salt Creek Midstream's crude gathering business for $600 million and securing CA$2.7 billion ($1.4 billion) in funding from private equity giants KKR and Apollo to support Westcoast pipeline expansions in Canada.

Verdict: Midstream wins if tax complexity isn't a concern

The energy midstream sector offers higher current yields than big oil, especially among MLPs and Canadian companies. So, if income is your sole aim, and you're fine with dealing with the tax complexities (MLPs send Schedule K-1 Federal tax forms, while there's a 15% withholding tax on Canadian dividends paid on shares held in a regular brokerage account), they're the better side of the barrel to buy right now.

Matt DiLallo has positions in Chevron, Enbridge, Enterprise Products Partners, KKR, and Kinder Morgan. The Motley Fool has positions in and recommends Chevron, Enbridge, KKR, and Kinder Morgan. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

Oneok (NYSE:OKE) is buying Brazos Midstream's Permian Midland Basin assets for over $4.4 billion. It's funding the deal through a $9 billion minority equity investment from funds managed by Apollo (NYSE:APO). These two deals will have major implications for the pipeline giant's roughly 4.5%-yielding dividend in the coming years.

Here's a look at Oneok's needle-moving acquisition and unique financing arrangement.

Image source: Getty Images.

Drilling down into the deal

Oneok is buying Brazos Midstream's Permian Midland natural gas gathering and processing assets for over $4.4 billion in cash. The acquired assets will include 700 miles of gathering infrastructure and 1.2 billion cubic feet per day of processing capacity following the completion of the Cassidy II plant in the third quarter of next year. The assets span 600,000 dedicated acres secured by long-term, fixed-fee contracts with an average of 12 years remaining with producers that include ExxonMobil and Diamondback Energy. The assets are highly complementary to Oneok's existing position and will double its processing capacity in the Midland Basin. The deal will strengthen its integrated Permian-to-Gulf Coast strategy by expanding its scale in the rapidly growing Permian Midland Basin, while adding long-term, fee-based contracted growth with leading producers.

The pipeline company is funding the deal with a unique structure. Private equity giant Apollo and its affiliates are making a $9 billion minority equity investment in Oneok through a Class B interest. Oneok will use the additional funds to retire $5 billion in debt, enabling it to reduce its leverage ratio to around 3.25 times next year. The Apollo investment carries an internal rate of return (IRR) capped at 7% for the first nine years, with all the value created above the cap flowing to shareholders. This investment has a lower cost of capital than Oneok's stock, and it offers the option to redeem it in the future.

While this deal structure is unique, this isn't the first time Apollo has used it to help a public company fund its investment strategy. Real estate giant Realty Income (NYSE:O) agreed to a very similar deal with Apollo earlier this year. Apollo made a $1 billion investment for a 49% stake in a joint venture holding 500 existing retail properties. Apollo's investment in Realty Income has a capped IRR of 6.875%, and the REIT can redeem it in the future. This investment provided Realty Income with low-cost capital to make new investments to support its growing high-yielding monthly dividend. It also provides a repeatable framework for future investments.

Why this matters for Oneok's dividend

The deal for Brazos Midland and the financing arrangement with Apollo will enhance Oneok's financial profile and growth trajectory. The pipeline company expects the acquisition to be immediately accretive to its earnings and free cash flow per share. The energy company noted in the press release announcing these agreements that the "acquisition increases momentum toward the high end of ONEOK's mid- to high-single-digit adjusted EBITDA growth target over the next five to seven years." Meanwhile, the funding will accelerate its deleveraging timeline and more than achieve its previous leverage target without needing to issue common equity. That will give it additional financial flexibility to support its growing backlog of organic expansion opportunities, especially in the Permian Basin.

Oneok also noted that the deals will accelerate its "flexibility to increase capital returns to shareholders, including through potential dividend increases and share buybacks." The company was already targeting 3% to 4% annual dividend growth. That would further build on its legacy of more than 30 years of dividend stability and growth. While Oneok hasn't increased its dividend every year, it has nearly doubled its payout since 2014, significantly outpacing its pipeline-stock peers.

However, the deal doesn't guarantee that Oneok will increase its payout or accelerate its current dividend growth plan. It still needs to execute its expansion strategy, including closing these deals (which it expects to occur in the fourth quarter) and completing its current slate of expansion projects within reasonable timelines and budgets.

A potentially winning transaction combo

Oneok is making a needle-moving acquisition funded with a non-dilutive investment from Apollo, which will also help it reduce debt. While it's using a unique funding strategy, it's in good company, with Realty Income recently completing a similar deal with Apollo. These transactions will put Oneok in the position to return more cash to investors in the future, potentially through even faster dividend growth. As a result, it should enhance Oneok's appeal to income investors.

Matt DiLallo has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Oneok. The Motley Fool has a disclosure policy.

Realty Income (NYSE:O), Verizon (NYSE:VZ), and Energy Transfer (NYSE:ET) are three of my favorite high-yielding dividend stocks. I personally own them all and would buy even more this September. They all currently offer attractive yields, with Realty Income recently at 5.2%, Verizon at 5.7%, and Energy Transfer leading the pack at 6.4%.

However, those big yields aren't the only reason they're my favorite high-yielding dividend stocks to buy in September.

Image source: Getty Images.

Realty Income

I think Realty Income is the best dividend stock you can buy. It offers a high yield (more than 5%, several times the S&P 500's 1% yield) and also pays its dividend monthly. Meanwhile, it has increased its payment 135 times since its NYSE listing in 1994 -- including the last 115 consecutive quarters -- growing it at a 4.1% compound annual rate.

The real estate investment trust (REIT) has a diversified real estate portfolio (retail, industrial, gaming, data center, and other properties) secured by long-term net leases with many of the world's leading companies. Net leases provide very stable rental income because tenants cover all property operating costs, including routine maintenance, real estate taxes, and building insurance. Meanwhile, Realty Income has a strong financial profile, including a conservative dividend payout ratio (less than 75% of its adjusted funds from operations) and a strong investment-grade balance sheet (A-rated credit).

There are about $15 trillion in real estate assets on U.S. and European companies' balance sheets, representing a massive investment opportunity for Realty Income. Data centers are a large and growing opportunity (over $1 trillion). It recently formed a joint venture to invest in data centers across the U.S. and Europe, with initial seed assets valued at over $6 billion. Realty Income has ample investment capacity and opportunities to support continued dividend growth.

Verizon

Verizon has increased its dividend for 19 straight years. The U.S. telecom giant has a massive recurring revenue base from its millions of wireless and broadband subscribers. That provides it with the cash flow to invest in maintaining and expanding its network, while returning cash to shareholders.

The company generated $18.4 billion in cash flow from operations during the first half of this year, easily covering its capital expenditures ($8.2 billion) and dividend ($5.9 billion). It used the remaining cash to repurchase shares ($3.5 billion) and strengthen its balance sheet. Verizon is on track to generate over $21.5 billion in free cash flow after capital expenditures this year, up more than 9% from last year. The company's growing free cash flow should support continued dividend increases, with its 20th consecutive annual raise likely to come this September.

Energy Transfer

Energy Transfer tops this group with the highest dividend yield. The master limited partnership -- it sends investors a Schedule K-1 Federal tax form each year -- aims to increase its distribution by 3% to 5% each year. It has raised its payment for 19 consecutive quarters.

The energy company operates an extensive midstream infrastructure network to support the flow of oil and gas from production basins to demand centers. Fee-based arrangements underpin about 90% of its earnings, providing it with stable cash flows. Energy Transfer generated nearly $5.3 billion of distributable cash flow during the first half of this year, easily covering the $2.3 billion distributed to investors.

Energy Transfer reinvests its retained cash flow to expand its energy midstream network. It currently plans to invest $5.6 billion-$5.9 billion into organic expansion projects this year, including new natural gas pipelines, oil pipeline expansions, and new natural gas liquids infrastructure. The MLP has secured projects that should enter commercial service through early 2030, providing strong visibility into future distribution growth.

This trio offers more than a high yield

Realty Income, Verizon, and Energy Transfer aren't three of my favorite high-yielding dividend stocks for their yields alone. They work together to provide sector diversification (real estate, telecom, and energy infrastructure) and differing yields and growth profiles. That helps lower the overall risk profile of my income streams, as each sector has specific risks (e.g., interest rate sensitivity for REITs, competition among telecoms, and commodity price volatility in the energy sector) that the others can help mitigate. They also have strong dividend growth track records, which should continue. This combination of features is why they're my favorite grouping of high-yield dividend stocks to buy this month.

Matt DiLallo has positions in Energy Transfer, Realty Income, and Verizon Communications. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.

I've had concerns about AT&T's (NYSE: T) dividend ever since it slashed its payout in 2022 following the spinoff of its media assets to create Warner Bros. Discovery. However, I honestly think that the dividend is finally safe again. The telecom giant's financial profile has improved significantly over the past few years, while it expects to deliver healthy financial growth through at least 2028.

Here's why I think AT&T's more than 4%-yielding dividend is finally safe again.

Image source: The Motley Fool.

From suspect to safe

AT&T slashed its dividend nearly in half in early 2022 to retain more cash to reinvest in the business and repay debt following the spin-off of its media assets. It took a while for that strategy to deliver results. Its leverage ratio was still elevated at the end of 2023, at 3.0 times, above its 2.5-times target range. As a result, it didn't have any excess free cash flow after paying dividends to repurchase shares since it was redirecting all of it toward strengthening its balance sheet.

Fast forward a few more years, and AT&T is in a much better financial position. Its leverage ratio has fallen to a more comfortable level (2.5 times at the end of 2025 and 2.7 times at the end of the most recent quarter). That's giving it the flexibility to return additional cash to investors after its $2 billion quarterly dividend payment. It has repurchased $5 billion of its shares through the first half of this year.

Its dividend should grow even safer over the next few years. AT&T expects to generate more than $18 billion in free cash flow after capital expenditures this year, up from $16.6 billion last year. It sees free cash flow rising over $19 billion next year and topping $21 billion in 2028. Meanwhile, continued share repurchases are steadily reducing its share count and therefore its total dividend outlay each year.

My only issue with AT&T is that it hasn't increased its dividend. So, while I think the dividend is finally safe, I'd like to see the company start growing it again; otherwise, it's not much better than owning a safe bond right now.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Warner Bros. Discovery. The Motley Fool has a disclosure policy.

Most income investors focus on the yield they can see today. This ETF follows an even smarter approach: it holds companies that pay rising dividends. As a result, the income grows on its own year after year, even while you sleep.

This brilliant ETF is the First Trust Rising Dividend Achievers ETF (NASDAQ: RDVY). Here's how it can help you build passive income and wealth while you sleep.

Image source: Getty Images.

Getting to know RDVY

The First Trust Rising Dividend Achievers ETF follows the Nasdaq U.S. Rising Dividend Achievers Index, which screens companies specifically for consistent dividend growth. The index starts with a universe of the 750 largest companies and whittles the list down based on several screens, including:

• Its dividend payments over the last 12 months must be greater than those paid in the trailing 12-month periods for the last three and five-year periods.
• It must have positive earnings per share in the most recent fiscal year that exceed its earnings per share three fiscal years ago.
• It needs to have a cash-to-debt ratio greater than 50%.
• It must have a trailing 12-month dividend payout ratio below 65%.

It then ranks these holdings and selects up to 50 for inclusion in each of the four sub-portfolios, which it reconstitutes and rebalances on a staggered schedule. The net result is a rotating portfolio of the best dividend growth stocks, currently totaling 71 holdings.

This ETF might not initially pass the screen of many income-focused investors because it currently has a low dividend yield (0.8% over the last 12 months). However, thanks to its focus on dividend growth, today's low yield should grow into a much bigger payday tomorrow.

Building your income (and wealth) while you sleep

Most income investors focus on a fund's current yield because it's the number they can see today. However, the smarter strategy is to concentrate on growth. A fund that's growing its distribution should provide more income over the long term. As a bonus, the total return should be much higher thanks to price appreciation, enabling you to grow your income and your wealth while you sleep.

For example, at RDVY's January 2014 inception, an investor would have paid $19.93 per share. They would have collected around $0.42 per share in income distributions that first year, or a roughly 2.1% yield on cost. Fast forward to this year, and they would have collected about $0.68 per share in distributions, or a 3.4% yield on their initial cost basis.

That rising income stream is only part of the story. RDVY's price is currently over $82 per share, a more than 300% increase. If an investor also reinvested their dividend income, their total annualized return would be 13.8% since the fund's inception.

While past performance doesn't guarantee similar results in the future, dividend growth stocks have a multi-decade record of delivering above-average total returns. Given its laser focus on dividend growers, RDVY should continue to deliver long-term income growth and strong total returns.

Built for growth

RDVY might not be the best ETF for those who need an income stream today. However, if you're still a long way from retirement, it's a smart fund to buy. It should pay a rising dividend while delivering strong price appreciation, growing your passive income and wealth while you sleep.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Shares of Occidental Petroleum (NYSE: OXY) currently sit about 10% below their 52-week high. Despite that lower price, I think the oil stock is a value trap right now. However, I also believe it's a bargain long-term.

Here's how I reconcile those opposing views.

Image source: The Motley Fool.

Why Occidental could be a value trap right now

Brent oil currently trades just below $90 a barrel. While that's up from $60 a barrel to start the year, it's below its peak near $120 a barrel.

I think there are further downside risks to oil prices in the near-term. The U.S. military is quietly getting oil out of the Strait of Hormuz, which has kept a lid on oil prices. That key waterway will eventually reopen to greater oil flows. Meanwhile, Persian Gulf countries are moving forward with alternative routes, which should lessen their reliance on the Strait in the future. Additionally, the recent U.S. oil deal with Venezuela will boost that country's output. I think these and other factors will drive oil prices lower over the coming year, which will likely weigh on Occidental's stock.

The case for a future bargain

While I think oil prices could drift lower in the near term, I expect they'll move higher over the longer term. As Shell's CEO warned earlier this year, "All the easy oil and gas has been found." That drives his view that "prices are going to move up...That's the story of five to 10 years."

Occidental has put itself in a strong position to capitalize on higher future oil prices. It expects to deliver a $4 billion improvement in annual sustainable cash flow by 2030 compared to 2025's oil price ($65 a barrel). Driving factors include lower new well costs, growth in higher-margin volumes, continued debt reduction, and the redemption of Berkshire Hathaway's preferred equity investment in 2029. Higher oil prices in 2030, as Shell expects, would add to this cash flow growth expectation.

So, while I think there's more downside potential for Occidental over the next year, I also believe the oil stock is a bargain compared to its earnings growth potential over the next five to 10 years.

Matt DiLallo has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

If you were making a list of the companies cashing in on the AI data center build-out boom, a gas pipeline company known for paying dividends probably wouldn't be there. That could be a costly omission. Pipeline giant Energy Transfer (NYSE:ET) has quietly become one of the biggest natural gas suppliers to data centers. That's putting it in a strong position to cash in on the AI power boom.

Here's a closer look at why Energy Transfer should be on your AI investment list.

Image source: The Motley Fool.

Turning on the gas

Data centers need lots of power, and they need it quickly. The country's electric grid can't keep up with the load requirements or the need for speed. As a result, natural gas is becoming a critical solution to the AI power problem. A growing number of data center developers are turning to gas to fuel on-site power from gas turbines and fuel cells.

They're also turning to Energy Transfer as their gas supplier of choice. Its extensive gas infrastructure includes nearly 107,000 miles of pipelines linking supply sources to demand centers. It has signed several deals to supply gas to support AI data center demand.

One of its biggest deals is with cloud giant Oracle. Energy Transfer will provide about 900,000 Mcf/d of natural gas to three of its U.S. data centers. Oracle is using this gas to power Bloom Energy's advanced fuel cells at one of the sites. It also has a 150,000 Mcf/d deal to supply Nexus with gas for an AI hyperscale campus currently under construction, and an agreement to supply gas to support a 900-megawatt AI factory campus for Crusoe. Additionally, it has an agreement to provide 150,000 Mcf/d of gas to a data center site in Arkansas.

Energy Transfer is also providing more gas to utilities to support growing power demand from AI data centers. It signed a 20-year deal with Entergy to provide at least 250,000 MMBtu/d of gas starting in December 2028. Entergy needs more gas to power data centers, including those Meta Platforms is building in Louisiana. Additionally, it's supplying a total of 300,000 Mcf/d of gas to four new gas-fired power plants in Oklahoma between now and the end of 2028.

High-return investments

Those projects are only the beginning. Energy Transfer is in advanced discussions with multiple power plants, data centers, and other demand customers for significant additional gas volumes.

Most of its projects will involve building a pipeline lateral from its existing network to connect a new data center or power plant. These projects require a minimal capital investment and generate strong returns. Additionally, growing gas demand is enabling the company to make larger investments, including constructing larger-scale pipelines to transport additional volumes to demand centers and developing additional gathering and processing infrastructure in production basins. Energy Transfer currently has several large-scale gas pipelines under construction, including the $2.7 billion Hugh Brinson and up to $5.6 billion Desert Southwest to support data center and power demand growth in Texas and Arizona, respectively. These larger-scale projects have strong returns.

These investments support Energy Transfer's continued strong growth. It expects to grow its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by at least 17.5% this year. It currently has projects underway that should enter commercial service through early 2030, including those to support growing demand for oil and natural gas liquids. These projects give it strong growth visibility. That supports its view that it can increase its already high-yielding distribution (over 6%) by 3%-5% annually.

There are risks involved with this backlog. Energy Transfer recently ran into a permitting issue that will delay one Oracle-linked gas pipeline project by six months. There will likely also be delays to future data center developments due to local opposition and other issues. Despite that, gas-fueled onsite power remains a faster solution than waiting on the grid.

Don't overlook Energy Transfer

The AI data center build-out story is broader than you might think. It's fueling robust demand for natural gas, which is benefiting sleepy pipeline stocks like Energy Transfer. The master limited partnership (an entity that issues a Schedule K-1 Federal tax form) is an overlooked way to cash in on the boom. That cash will come each quarter via its high-yielding payout.

Matt DiLallo has positions in Bloom Energy, Energy Transfer, and Meta Platforms and has the following options: long December 2028 $650 calls on Meta Platforms, short December 2028 $660 calls on Meta Platforms, and short October 2026 $150 puts on Bloom Energy. The Motley Fool has positions in and recommends Bloom Energy, Entergy, Meta Platforms, and Oracle. The Motley Fool has a disclosure policy.

I think Realty Income (NYSE:O) is the best monthly dividend stock to buy -- not because it has adopted the trademarked designation The Monthly Dividend Company®, but because it has a 57-year track record backing up that name. The real estate investment trust's (REIT) stated mission is to "deliver dependable monthly dividends that increase over time."

Here are the facts supporting my belief that it's the best monthly dividend stock you can buy.

Image source: The Motley Fool.

Fact-checking Realty Income's 'Monthly Dividend Company' claim

Realty Income boldly claims to be The Monthly Dividend Company. Here's how that assertion stacks up against reality:

• Does Realty Income actually pay monthly? Yes, Realty Income has now declared 674 consecutive monthly dividends since its founding in 1969. That's the longest known record for monthly dividends. Many of its competitors have switched from a quarterly dividend schedule to a monthly one after going public.
• Is Realty Income's dividend streak as reliable as it sounds? Yes, you can bank on the REIT's monthly income stream. In addition to 674 consecutive monthly dividend payments, Realty Income has increased its payment 135 times since its 1994 listing on the NYSE, including the last 115 consecutive quarters. It has grown its monthly dividend at a 4.1% compound annual rate during that period.
• Is Realty Income's monthly dividend safe? Yes, Realty Income pays a very dependable dividend backed by a durable and diversified real estate portfolio (retail, industrial, gaming, and data center properties secured by long-term net leases with many of the world's leading companies). It also has a fortress financial profile, including a conservative dividend payout ratio (less than 75% of its adjusted funds from operations) and a strong investment-grade balance sheet (A-rated).

These facts support my unshakable conviction that Realty Income is the best monthly dividend stock you can own.

Why does monthly dividend income even matter?

Most companies pay quarterly dividends by default because this aligns with the current quarterly filing requirement for financial statements. Additionally, many companies have lumpier cash flows, making it harder to fund monthly payments. Realty Income, on the other hand, typically receives monthly rental payments, which it uses to pay its monthly dividend.

Monthly dividends are better for most investors because they provide a smoother cash flow stream for reinvestment (dividends compound faster when received monthly) and covering living expenses. Funding living expenses will become increasingly important in the future because retirees will need a stable, consistently growing income stream to support their retirement. That's something Realty Income can provide.

Can Realty Income continue growing its monthly dividend?

Part of Realty Income's mission statement is delivering dividend growth. The REIT is in a strong position to continue increasing its dividend in the years to come. It has a healthy financial profile to support new investments. It also has a massive total addressable investment opportunity estimated at $15 trillion across the U.S. and Europe.

The REIT also has a growing list of strategic partners to support its continued growth. It has funding partners and programmatic investment partnerships. For example, it formed a more than $6 billion joint venture with Cloud Capital earlier this year to invest in data centers. These partners will provide additional capital and new investment opportunities to support its continued growth.

What are Realty Income's risks?

Realty Income is one of the lowest-risk monthly dividend stocks. However, it's not a risk-free investment. As a REIT, it's highly sensitive to changes in interest rates. When rates fall, borrowing becomes more expensive, impacting its ability to refinance existing debt as it matures and fund new investments. Rising rates also weigh on the valuation of high-yielding dividend stocks like REITs because it makes lower-risk fixed-income investments like bonds more appealing. Realty Income also has tenant risk (over 78% of its portfolio is retail properties, while only 34% of its tenants have investment-grade credit ratings). However, its diverse funding sources, growing roster of strategic capital partners, and diversified portfolio help mitigate these risks.

Why Realty Income is the best monthly dividend stock to own

Realty Income is the best monthly dividend stock to buy because it embodies what a monthly dividend company should be with its 57-year track record of income stability and growth. The REIT is in an excellent position to continue building on its legacy, making it a go-to source of reliable income for retirees in the future. While it's not a completely risk-free investment, it is the most bankable monthly dividend stock, making it the best one to own as a core holding to anchor any income portfolio.

Matt DiLallo has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.

Mega-cap tech stocks have gained significant value over the past few years, driven by AI enthusiasm. That's causing heavy concentration at the top for the Vanguard S&P 500 ETF (NYSEMKT: VOO), which tracks the S&P 500 through a market-cap-weighted approach. That's why, if the index gets too concentrated at the top, I'd choose the Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP), which, as the name implies, invests in the same 500 stocks, but with a roughly equal weighting to each one.

Image source: Getty Images.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Striking a balance

The Vanguard S&P 500 ETF passively tracks the S&P 500 index. As companies grow in size, they have a higher weighting in the index. Currently, eight of its 10 largest holdings are tech-related stocks with meaningful AI investments. Its top ten holdings account for nearly 40% of the index, led by Nvidia at 7.6%. On the one hand, the high allocation to these fast-growing AI stocks has helped drive VOO's strong returns in recent years. It has delivered more than a 15% annualized total return over the past decade, well above the S&P 500's historical average return of around 10%. However, the S&P 500's top-ten weighting has doubled during that period, surpassing the dot-com bubble peak.

Contrast VOO's concentration with the Invesco S&P 500 Equal Weight ETF. It has a vastly lower overall concentration, as its top ten holdings account for just over 3% of its total assets. Meanwhile, its top holding, Moderna, has a small allocation at around 0.6%.

That concentration difference matters. If Moderna were to crash, it wouldn't have much impact on RSP. However, if Nvidia or one of VOO's other large holdings craters, it would have a meaningful impact on its returns.

I still think VOO is a terrific ETF and wish I had bought shares a decade ago. However, if its top holdings ever grew too large (over 50%), I'd choose to buy RSP instead for a passive S&P 500 investment. While that might give up some additional AI-driven upside potential, it would help provide downside protection ahead of a potential AI stock correction.

Matt DiLallo has positions in Moderna. The Motley Fool has positions in and recommends Moderna, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

Bloom Energy (NYSE:BE) doesn't currently pay a dividend. However, I can still generate real retirement income from the advanced fuel cell maker now using options. While I don't currently need any retirement income, since I'm years away from retirement, I'm starting my strategy early so I can use the additional income to continue building my retirement nest egg.

Here's why I'm using this hydrogen stock and my three-part income strategy.

Image source: Getty Images.

Why Bloom Energy

Bloom Energy has become one of my highest conviction investment ideas. The advanced fuel cell company has rapidly become the standard for on-site power for data centers and other AI infrastructure. It's growing incredibly fast (100% year-over-year revenue growth expected in 2026), and it's increasingly profitable. It has a very long growth runway as more data center developers and other large power users turn to Bloom Energy as their on-site power solution.

The company's brisk growth and tie-in to an emerging sector (AI data centers) have made its stock very volatile. Shares are up more than 300% this year and were up more than 600% at one point. That volatility means its options pay very well as option premiums get directly priced off volatility. While this also means Bloom Energy is a riskier stock, I think that's a worthwhile trade-off, given my long-term conviction in the company.

My three-part options income strategy

With its share price surging this year, Bloom Energy currently trades at a rich valuation at 14 times forward sales and 73 times forward earnings. While I have a lot of conviction in the stock, I don't want to load my portfolio with shares at that valuation. That's why I'm starting my strategy by writing cash-secured put options to buy shares at a much lower price. Writing a put obligates me to buy 100 shares at the strike price at expiration. In exchange, I receive an upfront income payment. I can use that income to invest in other stocks, including potentially adding to my uncapped Bloom Energy position.

I recently completed my first round of writing put options on Bloom Energy and just wrote another round. I plan to continue writing cash-secured puts on Bloom Energy until I get assigned shares. Once assigned, I will start the second part of my income strategy by writing covered call options on those shares. This will enable me to generate more options premium income, in exchange for the obligation to sell my shares at the designated strike price. I hope to write call options above my assignment price, enabling me to sell them at a profit.

I will then write covered calls on Bloom Energy until my shares get called away -- meaning they close above the strike price, triggering a sell -- to continue the income-generation train. Once this happens, I'll start phase three, writing put options again to buy shares at a lower price to generate more income. This will start a new repeatable trade of writing puts to generate income.

This three-part options strategy is known as the wheel strategy. It aims to create a repeatable income trade on an underlying stock or index by first writing puts, then writing calls, and then writing puts again. The flywheel spins off income that I can use to make other investments.

This isn't a risk-free trade

The options wheel strategy can be a very lucrative source of income. However, it's far from risk-free. I'm using it on a stock that pays a very lucrative options premium for a reason: it's a highly volatile company trading at a rich valuation. There's a real risk that Bloom Energy's stock could tumble below my written put strike price to the point where writing covered calls on those shares would be an unappealing choice, as it would lock in a loss. This trade also caps my upside to the options premium received or the call strike price on a written call. I'm willing to accept that trade-off because I'm using a portion of my portfolio's cash position specifically earmarked to generate options premium income. I also own some Bloom Energy that I'm leaving uncovered for uncapped upside. This is also a much more active way to generate income, which might become less lucrative in the future if Bloom Energy becomes less volatile.

Earning income on a high conviction position

Bloom Energy has become a crucial provider of power solutions to help accelerate the development of AI data centers. I think it's a fantastic company with strong long-term growth potential, though it's trading at a high valuation. I'm leveraging my conviction in the company as a foundation to generate additional income for my retirement account. This strategy isn't for everyone, as it's higher-risk and requires more active oversight. That's fine with me, given my strong conviction in the company and my desire to use it to generate a real stream of retirement income to build an even bigger nest egg.

Matt DiLallo has positions in Bloom Energy and has the following options: short October 2026 $150 puts on Bloom Energy. The Motley Fool has positions in and recommends Bloom Energy. The Motley Fool has a disclosure policy.

Quantum computing stocks have been one of the hottest trades in recent years. Emerging leaders IonQ (NYSE: IONQ), Rigetti Computing, and D-Wave Quantum are up between 20% and 50% from their April lows. Look out even further, and this trio has soared between 480% and 1,710% over the past two years. While IonQ is growing at blazing speeds, it's too hot for me to handle.

Here's why I'm not ready to buy this top quantum computing stock.

Image source: Getty Images.

There's a lot to like about IonQ

I want to start by saying I'm genuinely intrigued by IonQ. The quantum computing company isn't all hype. It reported record revenues of more than $80 million in the second quarter, up an astonishing 287% year over year, driven by deployment across its entire quantum platform. That was its fifth straight quarter of delivering record results and the best quarter in its history.

That rapid growth should continue. IonQ recently raised its full-year guidance to between $280 million and $290 million. That doesn't reflect any contribution from its recent acquisition of SkyWater Technologies, which is creating the first vertically integrated, full-stack quantum platform.

Why IonQ is too hot for me to handle

Despite its massive revenue growth, IonQ is a long way from reaching profitability. Its total operating costs and expenses exceeded $417 million in the second quarter, more than five times its revenue. It has incurred a cumulative loss of $608.8 million from operations through the first six months of this year. While the company currently has a strong cash position ($2 billion after closing the SkyWater deal), it's burning through cash rather quickly. As a result, it will probably need to raise additional capital, which would dilute existing investors.

My other concern with IonQ is its valuation. The quantum computing company currently has a nearly $17 billion market cap following the more than 480% jump in its stock price over the past two years. That puts its valuation at over 55 times forward sales. While its revenue is growing rapidly, its valuation is rich. Stocks trading at lofty valuations tend to be very volatile, which has been the case with IonQ. The quantum computing stock has been down as much as 40% and up as much as 60% at various points this year.

This quantum computing stock isn't right for me

IonQ is seeing real demand for its growing quantum platform, which it's expanding through acquisitions like SkyWater. It should continue to grow rapidly in the coming years as demand for this emerging technology increases. That has translated to a rich valuation for IonQ, which has become very volatile. It's also losing a lot of money. That makes it too risky for me. While I wouldn't touch IonQ right now, I would consider investing in a quantum computing ETF to gain exposure to this exciting sector while I wait for IonQ's losses to narrow and valuation to come down.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends IonQ. The Motley Fool has a disclosure policy.

The average American salary is currently about $65,000 a year, according to the Bureau of Labor Statistics. Your salary might be much higher or lower than the national average. However, we'll use this median as our baseline to determine how many ETF shares the average person would need to buy to replace their salary entirely with dividends.

It's actually a rather simple formula that you can easily translate to your own situation. Divide the income target by the fund's current yield and then divide that number by the current share price to reach the number of shares you'd need to own. Don't worry if math isn't your thing. I'm going to run the calculations on two of the largest, most popular dividend ETFs: Vanguard High Dividend Yield ETF (NYSEMKT: VYM) and Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). That way, you can see the impact that a fund's current yield has on this equation.

Image source: Getty Images.

The Vanguard High Dividend Yield ETF

The Vanguard High Dividend Yield ETF is the third-largest dividend-focused ETF by assets under management (AUM) at $84.5 billion. It has a very simple investment strategy. The ETF passively tracks the FTSE High Dividend Yield Index, which aims to measure the investment returns of stocks with high dividend yields (excluding REITs).

The ETF currently holds over 600 high-yielding dividend stocks. It collects the dividends paid by its holdings and distributes them to investors each quarter. It has paid $3.63 per share in dividends to investors over the last 12 months. That gives it a trailing-12-month yield of 2.2% based on its recent share price of $165. I bolded the numbers that we need for this calculation.

First, we'll determine the required investment to generate the $65,000 in annual dividend income needed to replace the average worker's salary. That calculation is $65,000 / 2.2% = $2.95 million. Now, we'll determine the number of VYM shares you'd need to hold to hit that investment level. This calculation is $2.95 million / $165 = 17,905 shares.

That's obviously a significant amount of money and a lot of shares to buy. However, that's one ETF option. Others with higher yields -- such as SCHD -- can help reduce the total investment requirement.

The Schwab U.S. Dividend Equity ETF

The Schwab U.S. Dividend Equity ETF is the second-largest dividend-focused fund, behind the Vanguard Dividend Appreciation ETF, with $112.3 billion in AUM. It has a similar investment strategy. SCHD passively tracks an index focused on high-yielding dividend stocks (Dow Jones U.S. Dividend 100 index). However, this index has a narrower scope. It screens dividend stocks based on several dividend-quality characteristics, including yield and the five-year dividend growth rate. As a result, it holds about 100 stocks.

Over the last 12 months, this ETF has paid $1.05 per share in dividends. With a recent price of around $35 per share, its trailing 12-month yield is 3%.

Now we'll run through the math for how much SCHD you'd need to replace the average American salary: $65,000 / 3% = $2.17 million, or 13,156 shares at the current $35 price tag.

That's a much lower capital requirement than VYM for the same annual income, due entirely to SCHD's higher yield. SCHD's 36.4% higher yield than VYM's reduces your capital requirement by 26.5%. Investors aren't taking on any additional risk for that higher yield, as the index SCHD tracks screens for quality, while VYM's passively tracked index simply screens for yield. That focus on quality has paid off. SCHD has outperformed VYM over the last 10 years (12.7% average annual total return vs. 11.6%).

Meanwhile, despite its focus on yield, some of VYM's top holdings don't currently boast the highest yields due to price appreciation (for example, its top holding, Broadcom, with a 7.4% allocation, has a 0.7% yield after surging 333% over the past three years).

You can't replace your income overnight

You'd need over $2 million to replace the average American salary with income generated by one of the top dividend ETFs. This exercise illustrates what you'd have to build toward over the long term by routinely buying more shares of a dividend ETF to grow your income. It is possible to reach that goal over time, with SCHD currently offering the quicker of the two paths, thanks to its higher yield (it has also historically delivered strong annual dividend growth).

Matt DiLallo has positions in Broadcom and Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends Broadcom, Vanguard Dividend Appreciation ETF, and Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.

When investors want to play the AI power boom, the first names that come to mind are hot stocks in emerging energy technologies, such as advanced fuel cell maker Bloom Energy (NYSE:BE) and small modular reactor developer Oklo (NYSE:OKLO). Bloom has major AI partnerships with Oracle and Brookfield, while Oklo has deals with Meta Platforms and Switch.

One company almost no one is talking about is the high-yielding clean-power producer Clearway Energy (NYSE:CWEN). That's a mistake. Its parent (Clearway Energy Group) quietly signed a nearly 1.2-gigawatt (GW) deal to build renewable power for Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), and it's getting paid much more for the power produced at some of its legacy assets because the new power buyer is a hyperscaler with voracious energy needs.

That's only the beginning. AI power is one of the catalysts that make Clearway among the top renewable energy stocks to buy.

Image source: Getty Images.

Clearway Energy is starting to cash in on the AI power boom

This past January, Clearway Energy Group signed three long-term power purchase agreements (PPAs) with Alphabet's Google for nearly 1.2 GW of projects to support its data centers. They represent over $2.4 billion of investment in energy infrastructure, with the first projects expected to come online in 2027 and 2028. It's a significant expansion of its existing power partnership with Google, which currently consists of a 71.5-megawatt (MW) project in West Virginia.

While Clearway Energy isn't investing directly in these assets initially, it will in the future. It has already agreed to buy Goat Mountain (a wind repowering project in Texas backed by a Google PPA) from its parent when it begins commercial operations next year. Additionally, it has identified Swan Solar and Catamount Wind (two other Google-linked projects) for potential acquisition in 2028.

However, the Google deal isn't even the biggest story here. Clearway recently signed over 600 MW of PPAs to extend the contract life of existing wind farms its repowering to 2041. Customers include two contracts with a hyperscaler and one with another commercial and industrial customer, with fixed pricing more than two times the prior contracted or merchant pricing. These deals suggest that its legacy assets are becoming much more valuable in the AI age. It has a massive recontracting opportunity as legacy PPAs expire.

A new upside opportunity is emerging

The Google-tied drop-down deals are also only a drop in the bucket. Clearway Energy Group currently owns or controls a 32 GW development pipeline, providing a long runway of drop-down investment opportunities. Clearway Energy has currently committed to or identified 3.5 GW of investment opportunities through 2028, representing about $1.3 billion. These drop-down deals enable Clearway Energy Group to recycle capital into new renewable energy development projects, including those to support AI data centers.

These two catalysts provide a clear baseline for growth over the coming years. Clearway Energy currently expects to grow its cash available for distribution CAFD) per share at the top end of its 5%-8%+ target range through 2030, with growth likely to continue within that range in 2031 and beyond.

However, a new opportunity is emerging that could enhance its post-2030 growth rate: Co-located digital infrastructure power investments. Clearway Energy Group is currently developing over 17 GW of projects across five sites to build on-site power generation capacity at data center campuses. It sees an upside opportunity forming where Clearway Energy could provide over $1 billion in capital around 2030 to support this strategy. The first project in Wyoming targets a 2029 in-service date, with full capacity (3-4 GW) in 2030.

What this means for investors

Clearway isn't your typical AI power play. Popular names like Bloom Energy are growing fast (100% revenue growth expected this year) or are more about future promise (Oklo doesn't currently generate very much revenue). That high-powered growth potential has made them very volatile -- Oklo is currently down 75% from its 52-week high, while Bloom Energy's price is more than 35% below its peak. Clearway Energy, on the other hand, has been much less volatile (down bout 20% from its recent peak) due to the stability of its long-term PPAs and high-yielding dividend (currently over 5.5%).

That dividend should grow and become more sustainable over the coming years. Clearway Energy currently expects to grow its CAFD per share from $2.12 last year to over a range of $2.90-$3.10+ by 2030. With its current annualized dividend rate of $1.90 per share, Clearway can continue to grow its dividend while progressing toward its target long-term CAFD payout ratio of less than 70%. That combination of earnings and income growth should enable Clearway Energy to generate double-digit average annual total returns.

Now, to be fair, Clearway isn't a risk-free investment. It recently lowered its 2026 CAFD outlook due to this year's strong weather patterns (El Niño), which have impacted wind energy generation in the U.S. There's also a lot riding on its ability to acquire assets from Clearway Energy Group at fair terms. However, with AI data centers driving accelerating power demand, Clearway Energy has the potential to grow at or above its long-term target range for years to come.

An AI power name you should know

Clearway Energy isn't the next Bloom Energy or Oklo. It isn't building new energy tech from the ground up. Instead, it's building on the growing legacy of clean energy backed by a portfolio of assets secured by long-term PPAs. That legacy portfolio is becoming much more valuable in the AI age. Clearway will continue to add to its portfolio by acquiring assets from its parent and third parties. That should power steady cash flow and dividend growth for investors who can cash those dividend checks while others wait for hot names like Oklo to hopefully pay off one day.

Matt DiLallo has positions in Alphabet, Bloom Energy, Brookfield Asset Management, Clearway Energy, and Meta Platforms and has the following options: long December 2028 $650 calls on Meta Platforms, short December 2028 $660 calls on Meta Platforms, and short October 2026 $150 puts on Bloom Energy. The Motley Fool has positions in and recommends Alphabet, Bloom Energy, Brookfield Asset Management, Meta Platforms, and Oracle. The Motley Fool has a disclosure policy.

According to a recent report by Axios, the U.S. is in discussions with the Venezuelan government about taking an ownership stake in its vast oil resources. The reported deal would more than double the size of America's oil reserves. U.S. oil companies would develop the fields and provide oil revenue to Venezuela in return. "Calling this deal huge would be an understatement," stated one U.S. official in the Axios report, "It is massive."

Here's a look at the reported deal and what oil stocks could win.

Image source: Getty Images.

A potentially massive deal

The proposed deal would give the U.S. a stake in at least 17 of Venezuela's most promising oil and gas fields. They hold an estimated 90 billion barrels of proven reserves. That's almost double the size of America's current reserves and less than a third of Venezuela's reserves, which, at around 300 billion barrels, are the largest in the world.

While Venezuela has massive oil resources, its oil industry has never come close to tapping its production potential. It currently produces about 1.1 million barrels per day (bpd), well below the U.S., the world leader at 13.7 million bpd. It produces extra-heavy oil that's thick like tar and full of sulfur, requiring expensive production methods. The country has also significantly underinvested in its oil infrastructure over the years, causing output to decline from its peak of over 3.5 million bpd in the 1960s. Additionally, many U.S. oil companies have left Venezuela after the country nationalized their assets or demanded control over joint ventures.

Chevron: The clear frontrunner

While most U.S. oil companies left Venezuela years ago, Chevron (NYSE:CVX) has operated in the country for over a century. It has maintained a toehold on Venezuela's vast oil resources through a series of joint ventures with affiliates of Venezuela's national oil company Petróleos de Venezuela (PDVSA). This past April, Chevron consolidated its Venezuela heavy oil position through an asset swap, giving it a larger stake in Petroindependencia while its Petropiar joint venture received the right to develop the adjacent Ayacucho 8 area in the Orinoco Oil Belt in exchange for some gas licenses and another non-operated interest.

That swap is key to Chevron's strategy to grow its production in Venezuela by 50% within the next two years. It has already increased its output by 40,000 bpd over the past few years, bringing it to over 250,000 bpd.

Chevron is reportedly close to another deal with Venezuela to boost its operations in the country. The Wall Street Journal recently reported that it's one of several U.S. oil companies nearing deals to invest billions of dollars in Venezuela's oil fields. It could add two more fields to its existing trio of joint ventures. Given its long-standing operations, Chevron will likely be a big winner if the U.S. gains control over some of Venezuela's oil resources.

Waiting for the right opportunity

Fellow U.S. oil giants ExxonMobil (NYSE:XOM) and ConocoPhillips (NYSE:COP) left Venezuela more than two decades ago after the country nationalized their assets. However, both are evaluating a return.

Reuters reported in April that ExxonMobil and ConocoPhillips sent teams to evaluate investment opportunities in Venezuela. ConocoPhillips has been trying to collect the $12 billion in arbitration awards from Venezuela's 2007 nationalization of its assets. Collecting that award would likely factor into its decision to invest in the country. Exxon is also seeking restitution for the seizure of its oil assets in 2007. The New York Times reported in May that Exxon was in talks to acquire the rights to produce oil in up to six fields in Venezuela.

According to a Wall Street Journal report, neither company is among the group of oil companies set to join Chevron in the pending deal to invest billions into Venezuela's oil fields. However, those discussions will continue and could yield a deal in the future, especially if the U.S. agrees to take direct stakes in several Venezuelan oil fields. Given the size of the prize, they'll likely want to participate if they can agree on acceptable commercial terms.

An interesting development to watch

While it's not done yet, the U.S. is close to a potentially massive deal to take a direct stake in several Venezuelan oil fields. Additionally, several U.S. energy companies, including Chevron, are nearing agreements to invest billions of dollars into Venezuela's oil fields. Chevron is the clear potential winner, given its continued operations in the country. However, Exxon and ConocoPhillips could also win if they sign deals to reenter the country's oil market. That makes Venezuela an interesting storyline for investors in these oil companies to watch, as it could be a needle-mover for them in the future.

Matt DiLallo has positions in Chevron and ConocoPhillips. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.

The iShares Core Dividend Growth ETF (NYSEMKT: DGRO) has delivered a 13.4% average annualized total return over the past decade. If this top dividend ETF maintains that pace, it could grow from its current share price of less than $80 to more than $280 over the next 10 years.

Here's a closer look at the iShares Core Dividend Growth ETF's return potential.

Image source: Getty Images.

Investing in historically strong performers

The iShares Core Dividend Growth ETF has also delivered double-digit average annualized total returns over the past one-, three-, and five-year periods as well since its inception in 2014 (12.2%). That lines up with the historical data on dividend growth stocks. Over the last 50+ years, dividend growers in the S&P 500 have delivered a 10.2% average annualized total return, according to data from Ned Davis Research and Hartford Funds.

DGRO has outperformed this average because it doesn't just hold any dividend growth stock. A company needs to pass two strict tests to be included in the index the fund tracks (the Morningstar U.S. Dividend Growth Index). It must have increased its dividend for at least five consecutive years and have a positive earnings forecast with a dividend payout ratio below 75%. It also excludes companies with dividend yields in the top 10% of the screen, as well as REITs. The net result is a group of companies (currently 390) with a strong probability of continued dividend growth.

The past strong performance of this ETF and dividend growth stocks doesn't guarantee similarly strong returns in the future. The past decade has been a strong period for stocks, and the last year has been a big one for dividend growers (21% return for DGRO). Still, given its focus on holding the strongest dividend growers and historical returns of companies that increase their dividends, there's a good reason to believe it can deliver double-digit average annual total returns over the next decade. Assuming a 10% average annual total return, its shares would grow from the current sub-$80 level to nearly $210 in a decade.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

I expect VICI Properties (NYSE: VICI) to outperform Realty Income (NYSE: O) over the next five years. That's a bold prediction for someone as bullish on Realty Income as I am. It's because I believe VICI Properties is much cheaper relative to Realty Income right now.

Here's why I expect this top high-dividend REIT to outperform Realty Income stock over the next five years.

Image source: Getty Images.

Realty Income has a strong investment case

I want to be clear that I firmly believe Realty Income will be a strong investment over the next five years. The REIT has a diversified portfolio of durable properties (retail, industrial, gaming, and data centers). They provide it with resilient rental income to support its high-yielding monthly dividend (currently yielding over 5%). The REIT has a terrific track record of dividend growth, with 135 increases since its public market listing in 1994 and a 4.1% compound annual dividend growth rate.

I expect its growth to continue. Realty Income has a conservative dividend payout ratio (less than 75% of its adjusted funds from operations, or AFFO) and a strong investment-grade balance sheet (A-rating). It also has a growing list of strategic partners that provide growth capital and new investment opportunities, including Blackstone, which has closed two gaming investments with the REIT. I think Realty Income can continue growing its AFFO per share at a low- to mid-single-digit annual rate over the next five years to support continued dividend increases. Add that to its yield, and its total annual return could average around 10%, assuming no change in its valuation multiple.

The investment case for VICI Properties is even better

VICI Properties shares many similarities with Realty Income. It also invests in net lease real estate, though it focuses exclusively on experiential properties (i.e., gaming, hospitality, wellness, entertainment, and leisure destinations). It also has a strong dividend growth track record (every year since its IPO in 2018, at a net lease REIT-leading 7% compound annual rate) and a rock-solid financial profile (sub-75% AFFO payout ratio and an investment-grade balance sheet).

One core difference is the duration and inflation protection of its net leases. It typically invests in properties secured by very long-term leases (an average remaining lease term of 40 years), much longer than the 8-14-year average for net-leased properties. Meanwhile, an increasing percentage of its leases feature inflation-linked rental escalations (45% in 2026, rising to 87% by 2035), compared with the low fixed annual rent growth in most net leases. As a result, VICI Properties delivers faster same-store rent growth (1.7% in 2026, compared to the 0.4% sector average and 1.1%-1.3% for Realty Income). Add in acquisitions, and I think VICI can deliver mid-single-digit annual AFFO per share growth over the next five years.

Despite the similarities and the areas where VICI Properties stands above its peers, it trades at a much lower valuation than Realty Income (10.6x AFFO vs. 14.1x). That's why it has a higher dividend yield at nearly 7%.

Dual outperformance drivers

VICI Properties currently trades at a discount to Realty Income, even though it invests in properties with similar leases. I expect this discount to narrow over the next five years. Add that to its higher dividend yield, and I anticipate VICI Properties will produce a higher total return. While I own both REITs, I'd make a larger wager on VICI Properties right now because it could deliver bigger winnings over the next five years.

Matt DiLallo has positions in Blackstone, Realty Income, and Vici Properties. The Motley Fool has positions in and recommends Blackstone and Realty Income. The Motley Fool recommends Vici Properties. The Motley Fool has a disclosure policy.

This past June, Shell (NYSE:SHEL) CEO Wael Sawan warned that oil prices would likely continue to rise long after the current conflict with Iran ends. He believed it would take "close to a year, if not longer," for the oil market to find balance again, with even greater challenges in the long term. However, oil prices have been trending lower recently amid talks between Iran and Oman over a deal to reopen the Strait of Hormuz, which is critical to the global oil market.

Here's a look back at his warning, and whether the recent dip in crude prices suggests the long-term outlook for Shell and other oil stocks has changed.

Image source: Getty Images.

What's the latest on the Strait of Hormuz

Iran and Oman are currently working through the details of an agreement for the Strait of Hormuz. According to Iran, the countries have agreed on how to share the waterway and its revenues. A full reopening of this critical waterway -- around a fifth of global oil and gas supplies flowed through it before the war -- would ease the global energy supply picture.

Optimism surrounding a deal has driven down oil prices. Brent, the global oil benchmark, recently dipped below $88 a barrel, its lowest level since Aug. 10.

The global economy has navigated disruptions to the Strait of Hormuz through a series of workarounds. Members of the International Energy Agency have released oil from emergency stockpiles, including the U.S. Strategic Petroleum Reserve. Meanwhile, Saudi Arabia and the UAE have ramped up shipments via pipelines that bypass the Strait of Hormuz. Additionally, the U.S. military reported that it has helped 660 million barrels of oil pass through the Strait of Hormuz since May. These workarounds have helped keep oil prices down.

The real warning from Shell's CEO

While Shell CEO Wael Sawan warned about the continued near-term impact of the Strait of Hormuz disruption on the oil market, his greater concern was the long-term story that could keep them elevated over the longer term. He stated at a conference in June that "prices are going to move up...That's the story of five to 10 years." That's because "All the easy oil and gas has been found." As a result, the industry will need higher prices to tap into resources that are currently uneconomic to develop.

Shell's long-term bullish outlook for oil and gas is driving its strategic shift. It's currently divesting underperforming assets, including its onshore renewable power business in Europe and potentially its U.S. chemicals assets. That will enable it to sharpen its focus on its upstream oil and gas operations.

The company currently plans to deliver 1 million barrels of oil equivalent per day in new production by 2030. That will enable it to fully offset production declines in its legacy assets, maintaining its liquids production at an average rate of 1.4 million barrels per day through 2030 while growing its liquefied natural gas (LNG) sales volume at a 4% to 5% compound annual rate (most LNG contracts have oil-linked pricing).

Shell is investing heavily to develop new sources of oil and LNG to capitalize on expected long-term growth in demand and prices for these commodities. The company recently signed several deals with Venezuela to develop its oil and gas resources. It also recently made a potential oil discovery offshore Egypt. Shell and its partners are also looking to expand LNG Canada. These and other moves position Shell to continue supplying the global economy with oil and LNG.

Shell remains focused on the long-term view

Oil prices have come down recently on the hopes that the Strait of Hormuz will fully reopen, increasing the supply of oil and LNG to global markets. However, that doesn't mean Shell's CEO is wrong on his long-term view for the oil market. With most of the easy oil and gas resources already developed, oil prices will need to rise over the next five to 10 years to support the development of currently uneconomical resources. That's driving Shell's continued investment in oil and LNG. While oil prices could drop in the interim, the long-term outlook suggests they'll be higher, which would put Shell in a strong position to create value for its shareholders as it narrows its focus on growing its upstream business.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Salt Creek Midstream is selling its crude oil gathering business for $600 million. The 500-mile system gathers oil in the heart of the prolific Delaware Basin. The buyer is the Canadian energy infrastructure giant Enbridge (NYSE:ENB).

While $600 million might seem like a rounding error for Enbridge, considering its more than 10 billion Canadian dollars ($7.2 billion) annual growth capital investment capacity, it's an important strategic deal for the energy giant. Here's why it's buying these assets and what the deal means for investors in the pipeline stock.

Image source: Getty Images.

What Enbridge is buying and where

Enbridge is buying Salt Creek Midstream's crude oil gathering business, which incudes 100% of the Orla and Wink North systems and a 50% interest in the Delaware Crossing system. The systems feature roughly 500 miles of crude oil gathering infrastructure in the core of the Delaware Basin, which is one of the most prolific and competitive oil fields in North America. The three gathering systems have a combined throughput capacity of 420,000 barrels per day and a storage capacity of 350,000 barrels. The system serves more than 20 oil and gas producers, backstopped by about 320,000 net dedicated acres under long-term commercial agreements with an average remaining term of around 10 years. The assets should generate stable, long-term cash flows and provide a durable foundation for growth.

While that stable cash flow is important for Enbridge to support its high-yielding dividend (currently over 5.5%), the acquisition is far more strategically important. The system delivers crude oil to several long-haul pipelines in the region, including Enbridge's majority-owned Gray Oak Pipeline (68.5% stake) and the Cactus II Pipeline (30% interest). As a result, it will provide a direct strategic connection between oil produced in the Permian Basin and export capacity at the Enbridge Ingleside Energy Center (EIEC), North America's largest crude oil export terminal. It will extend its presence deeper into the Permian Basin and strengthen its value chain, enabling it to offer more customers well-to-water integration through its connected pipeline system and export capacity.

The impact on Enbridge

Enbridge expects the acquisition to be immediately accretive to its distributable cash flow per share and its earnings per share. That will enhance its ability to sustain and grow its dividend. However, the transaction won't boost its results this year, since it doesn't expect to close the deal until later in 2026. Instead, it should be modestly additive to 2027's cash flow and earnings. Enbridge had already expected an acceleration starting next year from its current 3% compound annual growth rate to around 5% per year as its cash tax rate levels out. This acquisition will further pad next year's financial results.

The bolt-on nature of this acquisition also aligns with Enbridge's capital allocation strategy. Thanks to its reasonable dividend payout ratio (60%-70% of its cash flows) and solid investment-grade balance sheet (4.5x-5.0x target range), it has CA$10 billion-CA$11 billion ($7.2 billion-$7.9 billion) in annual growth capital investment capacity. While most of that capacity will go toward its massive and growing backlog of organic expansion projects (CA$41 billion of secured projects as of the end of the second quarter or $25.6 billion), it has room to make accretive acquisitions that enhance its platform.

The acquired assets also provide a foundation for future growth. Enbridge could further extend its value chain in the Delaware Basin by making additional bolt-on acquisitions or approving additional capacity expansions in the region or further downstream. For example, Enbridge has room to expand EIEC, including further export dock expansions. It sees the potential to invest up to another CA$1.5 billion ($1.1 billion) into this terminal in 2027 and beyond.

A small, but notable deal

The purchase of Salt Creek Midstream's crude oil gathering business isn't a needle-mover for Enbridge. However, it's still a strategically important deal for the pipeline giant. It will also be immediately accretive to its earnings when it closes later this year, providing additional support for its growing dividend. That will enhance its ability to continue growing shareholder value. The company's combination of steady growth and reliable income (31 years of increases in Canadian dollars) makes it one of the best energy stocks to buy and hold for the long term.

Matt DiLallo has positions in Enbridge. The Motley Fool has positions in and recommends Enbridge. The Motley Fool has a disclosure policy.

After watching Bloom Energy (NYSE: BE) from afar for a while, I finally added the stock to my portfolio. I had been waiting for a pullback. While that happened a while ago, I couldn't buy shares due to trading restrictions. With those restraints recently lifting, I pounced on the opportunity to add the top hydrogen stock to my portfolio.

Here's why I'm thrilled to own a piece of this critical power solutions provider.

Image source: Getty Images.

Here's what took me so long

I completely missed the run-up in Bloom Energy stock over the past few years. Admittedly, I thought the company was more hype than substance. As I began to realize my mistake, I didn't want to buy into the momentum that had sent its valuation to an absurd level. At its peak earlier this year, Bloom Energy traded at more than 30 times revenue.

However, the stock has cooled off a little bit from its red-hot run. It's currently down about 40% from its 52-week high. As a result, it now trades at a slightly less absurd valuation at 14.5 times forward sales and 75 times forward earnings. That's still very rich, but not completely unreasonable for a company that expects to grow its revenue by 100% this year and generate real, growing profitability.

I wanted to buy shares during the recent sell-off in AI stocks. However, I couldn't due to trading restrictions. Due to our disclosure rules, I can't buy a stock I recently wrote about. I'm also part of a project that has restricted participants from buying shares. With both restrictions recently lifted, I was finally able to buy the stock.

Why this likely won't be my only purchase

Bloom Energy's advanced fuel cells have gone from a promising technology to a critical solution over the past year. Two partnerships highlight this shift.

In July 2025, Bloom Energy announced a collaboration with Oracle (NYSE: ORCL) to deliver power to its data centers at the speed required for AI. The collaboration aimed to deliver on-site power to Oracle's AI data centers within 90 days. Bloom Energy delivered its first fully operational fuel cell system to Oracle in just 55 days. That led the cloud giant to expand the strategic partnership in April to deploy up to 2.8 gigawatts to accelerate AI infrastructure build-out.

Bloom Energy also announced a $5 billion AI infrastructure partnership with Brookfield Asset Management (NYSE: BAM) last October. The partnership marked Brookfield's first investment through its dedicated AI infrastructure strategy, with Bloom becoming its preferred partner for on-site power solutions at its global AI factories (specialized AI data centers). Brookfield has since expanded that partnership fivefold to $25 billion to build and finance rapid power infrastructure for AI.

Given the rapidly expanding demand for its fuel cells, I expect to continue adding to my Bloom Energy position. I'd pounce if there were another 20% sell-off in the stock, assuming no fundamental shift in the thesis. There are certainly downside catalysts, including permitting issues for data center developments linked to Bloom Energy's fuel cells.

I'm finally building a position in Bloom Energy

I've had my eye on Bloom Energy for a while now, and finally added it to my portfolio. Even though I had to wait a little longer due to trading restrictions, I still like my entry point. I'd love an opportunity to add to my position if the stock sells off again, given my high conviction in its future growth.

Matt DiLallo has positions in Bloom Energy and Brookfield Asset Management and has the following options: short October 2026 $150 puts on Bloom Energy. The Motley Fool has positions in and recommends Bloom Energy, Brookfield Asset Management, and Oracle. The Motley Fool has a disclosure policy.

AGNC Investment (NASDAQ: AGNC) has an eye-popping dividend yield of more than 13%. A yield that high is almost always a trap. However, I think AGNC is a bargain, at least in the current market environment.

I'm going to lay out the case for why the real estate investment trust (REIT) could be a classic dividend yield trap and why I think it's actually a bargain right now. Unraveling that tension should aid you in deciding whether a big-time yield belongs in your portfolio.

Image source: Getty Images.

The case for a trap

A yield trap is a stock with a currently high dividend yield that its underlying financials can't support indefinitely. AGNC Investment has been such a trap in the past, evidenced by the series of dividend cuts it has made over the years:

AGNC Dividend data by YCharts

There's a real risk that it might need to cut its dividend again. The mortgage REIT invests solely in Agency MBS (pools of residential mortgages guaranteed against credit losses by government-sponsored enterprises such as Freddie Mac). That leaves it highly exposed to changes in interest rates and other market risks. It also invests on a leveraged basis, which can work both ways, boosting its returns during favorable market conditions and negatively impacting them when they deteriorate. If there's another major credit market upheaval, AGNC might need to cut its dividend again.

The case for a bargain

AGNC Investment isn't like other REITs. It doesn't own a portfolio of rental properties that generate stable income. It actively invests in Agency MBS to earn a leveraged return above its cost of capital (including operating costs and dividend payments). It routinely raises new capital by selling additional shares to grow its MBS portfolio.

The REIT's CEO, Peter Federico, highlighted on the second-quarter earnings conference call that it can currently earn returns in the 15% to 17% range when it leverages its capital within its 7.0-7.5 times target range. It can currently raise equity capital at a yield slightly above 13%, allowing it to make accretive new investments. It raised $167 million of equity capital during the second quarter. That enabled it to grow its portfolio (from $94.7 billion at the end of the first quarter to $97.2 billion at the end of the second) and its book value per share (up 2.4% to $8.58).

Federico noted on the call that the current return on equity range "aligns really well with the economics of our dividend." That alignment is why it has been able to maintain its payment for 75 straight months.

Today's bargain could be tomorrow's trap

I think AGNC is a bargain, not a trap, because its dividend aligns with its current returns. However, that's because the market environment is favorable these days. Federico commented in the earnings press release that "favorable dynamics should be supportive of Agency MBS performance over the near to intermediate term and position AGNC to continue to deliver strong risk-adjusted returns for our stockholders."

The rub here is that the currently positive market environment, which includes elevated mortgage rates, strong MBS demand, and historically wide mortgage spreads, won't last forever. If the Federal Reserve makes an abrupt, unexpected policy shift, market dynamics could move in the opposite direction. That makes AGNC Investment a riskier income stock. Investors need to keep an eye out for any signs that it's turning from a bargain to a trap.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Main Street Capital (NYSE: MAIN) has paid a $0.30-per-share supplemental dividend to investors each quarter in 2026. That's on top of its steadily rising monthly dividend. The business development company (BDC) currently pays $0.265 per share each month, 3.9% above the year-ago level.

Here's a look at this supplemental income stream, which makes the BDC an even more compelling passive income investment.

Image source: Getty Images.

Dual income streams

Main Street Capital's dividend policy aims to provide investors with a recurring monthly dividend they can bank on, along with significant additional value through supplemental dividends. It has paid supplemental dividends for 20 straight quarters, maintaining the current $0.30-per-share rate since early 2024. It has declared cumulative supplemental dividends of $8.74 per share since its 2007 IPO. The company pays supplemental dividends when its distributable net investment income (DNII) significantly exceeds its monthly dividend, or when it generates net realized gains and can maintain a stable or positive net asset value per share. It doesn't always make supplemental payments and has cut and suspended this additional dividend in the past.

The flexibility of the supplemental dividend enables Main Street Capital to pay a more secure monthly dividend. It sets this payment at a sustainable level. During the second quarter, its DNII covered the monthly dividend by 1.4 times. That gives it a comfortable cushion and room to grow. The BDC has grown its monthly dividend by 141% since its IPO, including 12 increases since the fourth quarter of 2021. It has never cut its monthly dividend since its IPO.

Income comfort plus a bonus

As a BDC, Main Street Capital must distribute 90% of its taxable net income to shareholders to remain in compliance with IRS regulations. Most BDCs pay one large dividend, typically quarterly, to reach their targeted payout level. If their income falls, which is common when interest rates decline, or the economy deteriorates, they need to reduce their dividends.

Main Street Capital's two-part dividend policy aims to address income sustainability issues while ensuring compliance. The base monthly dividend provides investors with significant comfort knowing that they can rely on this income stream. It grows steadily, which helps provide real income growth after inflation.

Meanwhile, the supplemental dividend serves two functions. It provides an outlet for the Main Street Capital to return excess taxable income to investors to remain compliant. That additional payment gives investors another meaningful income stream. It's not as durable as the monthly dividend, so they should view it as a bonus. However, there is some near-term visibility on this payment. The BDC has already announced it will pay a $0.30-per-share supplemental dividend in September. Additionally, CEO Dwayne Hyzak stated on the second quarter call that "we currently anticipate proposing an additional significant supplemental dividend payable in December 2026."

Get paid up to 16 times a year

Main Street Capital offers two distinct income streams. It pays a base dividend on the 15th of every month, built on almost two decades of dependability. It tops that off with a supplemental dividend payment near the end of each quarter. While that second payment isn't guaranteed, Main Street has paid these dividends for 20 straight quarters and expects that trend to continue. That's up to 16 dividend payments each year. Main Street Capital's unique policy and frequent payments make it an enticing passive income investment.

Matt DiLallo has positions in Main Street Capital. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

I hold a growing position in the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). I still believe in this top dividend ETF and plan to continue building my position.

However, I recently came across a little-known ETF that has delivered a trailing 12-month yield of 10.5%, more than triple SCHD's level. The fund has also delivered a 17.2% average annual total return since its inception in 2019, outperforming the S&P 500 (16.2%) and SCHD (13.8%).

Here's why I still plan to continue investing in the Schwab U.S. Dividend Equity ETF while also layering in this new position.

Image source: Getty Images.

A top dividend ETF

The Schwab U.S. Dividend Equity ETF is, in my opinion, the gold standard among dividend ETFs. The passively managed fund holds 100 top dividend stocks that offer both yield and dividend growth. Its trailing 12-month yield of 3.1% is triple the S&P 500's level. Meanwhile, its holdings have grown their dividends at an average annual rate of 9.4%. That combination of yield and growth has enabled the fund to deliver strong total returns throughout its history. That makes it a core ETF to buy and hold long term, even if income isn't your primary goal.

Another compelling income option

While I will continue to buy SCHD, I also recently started a position in the Overlay Shares Large Cap Equity ETF (NYSEMKT: OVL). It's an actively managed fund that seeks to outperform the S&P 500's total return through a combination of capital appreciation and income production from an options overlay strategy.

However, unlike other income ETFs that write call options to generate income (e.g., JEPI or JEPQ), OVL sells put options. It uses a put credit spread strategy in which it writes out-of-the-money (i.e., below the current market price) put options on the S&P 500 index while simultaneously buying an even lower-strike-price put option for protection. This trade generates a net credit, which provides the fund with income to distribute to investors each month. Additionally, the ETF provides direct upside exposure to the S&P 500 by investing in the Vanguard S&P 500 ETF.

Income ETFs that write call options cap the upside. By writing puts instead of calls, this fund doesn't cap the upside. That has enabled it to outperform the S&P 500 while also generating income for investors.

However, that's not a risk-free trade-off. The put options add some downside exposure, with the risk capped at the lower strike price. Additionally, this is a small ETF ($411 million in assets under management compared to $112 billion for SCHD) with a much higher expense ratio (0.79% for OVL compared to 0.06% for SCHD)

An income complement, not a competitor

I view OVL as a complement to my income strategy, not as a competitor to SCHD or a replacement for it. SCHD is a large fund that holds 100 top high-yield dividend growth stocks that should provide me with a growing stream of dividend income. OVL offers the potential to earn much higher income through its options overlay strategy, while delivering a higher total return relative to the S&P 500 in a flat-to-rising market. However, it's riskier, as income generation will be lumpier, with greater downside risk during a stock market sell-off. That's why I plan to keep my allocation small, relative to SCHD.

Matt DiLallo has positions in JPMorgan Equity Premium Income ETF, JPMorgan Nasdaq Equity Premium Income ETF, Listed Funds Trust-Overlay Shares Large Cap Equity ETF, and Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

Iraq's oil business has always been in the shadow of fellow OPEC member Saudi Arabia, an organization it helped co-found at the Baghdad Conference in 1960. It now wants to come out of the shadows. Iraq recently sent a delegation to Saudi Arabia seeking a higher output quota from OPEC. It has previously warned that it could follow the UAE's lead and leave OPEC if it can't raise its output.

Iraq doesn't just want a small production boost. It wants to grow its production to between 8 million and 10 million barrels per day (bpd) within six years. That's more than double the 4 million bpd it had been producing before the war with Iran slowed oil flows out of the Strait of Hormuz. It would rival Saudi Arabia, which can produce up to 12 million bpd.

Here are three energy stocks positioned to benefit from Iraq's oil ambitions.

Image source: Getty Images.

Chevron

Chevron (NYSE:CVX) could be one of the biggest beneficiaries of Iraq's oil growth strategy. The oil giant has signed memorandums of understanding with Iraq for the West Qurna 2 and Nassiriya oil fields. If it reaches final commercial agreements, it would take operating control of West Qurna 2, one of the world's largest oil fields. It currently produces 460,000 bpd, accounting for nearly 10% of Iraq's production and 0.5% of global oil supply. Meanwhile, Nassiriya is a smaller field today with significant exploration potential.

Iraq wants Chevron to nearly double West Qurna 2's production to between 750,000 and 800,000 bpd after assuming operational control. The field holds an estimated 13 billion barrels of recoverable resources. Meanwhile, it's targeting an initial capacity of 600,000 bpd from the Nassiriya project within seven years of starting work. Chevron is also evaluating a pipeline project to bypass the Strait of Hormuz. Chevron has significant growth potential in Iraq if it secures final agreements with the country.

ConocoPhillips

ConocoPhillips (NYSE:COP) is about to enter the Iraqi oil sector. The U.S. oil and gas giant recently agreed to buy a 42% interest in BP Energy Company of Kirkuk. This investment will support the ongoing redevelopment of four large-scale fields currently producing in northern Iraq. ConocoPhillips' CEO Ryan Lance noted in the press release announcing the deal that this was a "unique redevelopment opportunity" that provides access to a material, high-quality resource. The redevelopment program would leverage a large existing production base. Iraq estimates that there are more than 3 billion barrels of recoverable oil equivalent in these fields. There's also significant additional exploration potential.

The U.S. oil and gas giant is also part of a consortium that has emerged as a potential leader to develop Iraq's Akkas gas field. The field holds an estimated 5.6 trillion cubic feet of gas. Iraq has struggled to advance development due to security concerns and infrastructure constraints. This potential second opportunity shows the company's continued interest in Iraq, which could signal its openness to future deals to help Iraq boost its oil output.

ExxonMobil

ExxonMobil (NYSE:XOM) was one of the first U.S. oil companies to enter Iraq to develop its oil fields after the U.S. invasion in 2003. However, it left the country in 2023 after transferring operations of the West Qurna 1 oilfield to PetroChina due to poor returns and other issues.

The U.S. energy giant took a step to return to Iraq last year by signing an agreement to develop its massive Majnoon oilfield and expand the country's oil exports. Majnoon is one of the largest oilfields in the world with an estimated 38 billion barrels of oil in place. The field has yet to deliver anything close to its full production potential due to many issues over the years. However, it could be a major growth driver for Exxon if it secures a binding commercial agreement and succeeds in developing Majnoon.

Iraq's oil ambitious could fuel lots of growth for these oil companies

Iraq has never capitalized on the full potential of its oil resources. Its government wants to change that by more than doubling its output within the next six years. It can't do that alone. It needs the technical expertise and capital resources of major Western energy companies. That's opening the door for Chevron, ConocoPhillips, and ExxonMobil to secure deals to help it boost Iraq's output. As a result, it could be a major growth driver for these top oil stocks in the coming years.

Matt DiLallo has positions in Chevron and ConocoPhillips. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends BP and ConocoPhillips. The Motley Fool has a disclosure policy.

Shell (NYSE:SHEL) has received interest from multiple bidders for its U.S. chemicals assets, including ExxonMobil (NYSE:XOM). According to a Financial Times report, Exxon is among the four remaining bidders for the assets, which could cost up to $8 billion. They're non-binding bids that represented various expressions of interest in these assets.

Here's a look at what it would mean for ExxonMobil investors if the energy giant won the bidding for Shell's U.S. chemicals assets.

Image source: Getty Images.

Drilling down into the potential sale

Shell is looking to divest some of its underperforming assets, which include its U.S. chemical plants. The global energy giant currently operates four plants in the U.S. across Louisiana, Texas, and Pennsylvania. They produce chemicals used in plastics, detergents, and pharmaceuticals.

According to the Financial Times, four entities have submitted bids for these assets: ExxonMobil, the chemicals company LyondellBasell, the private equity firm Apollo Global Management, and the chemicals arm of the state-owned Kuwait Petroleum Corporation. Some of those bids were for the entire portfolio, while others were for only some of the assets.

The reported $8 billion potential price tag represents a steep discount to Shell's invested capital in the assets, driven by underperformance and the current cyclical downturn in the chemicals sector. Shell spent $14 billion alone to build its Pennsylvania plant, more than double the initial cost estimate. It has had operational and financial troubles since opening. The overall headwinds affecting its chemicals business have weighed on Shell's earnings in recent years, though improved chemicals margins in the second quarter of this year helped boost earnings.

A sale of its underperforming U.S. chemicals assets would enable Shell to sharpen its focus on its best assets. It recently agreed to sell its onshore European renewables platform to TotalEnergies.

What a winning bid would mean for ExxonMobil

If Exxon wins the bidding for Shell's U.S. chemicals assets, it would significantly expand the U.S. energy giant's domestic petrochemical footprint. That would enhance its scale advantages, enabling it to leverage its greater scale to get more out of these assets. A core aspect of Exxon's long-term strategy is delivering structural cost savings, which it could enhance by acquiring assets that would increase its scale and enable operational synergies. Further, it would do so at a significant discount to replacement cost. It would be buying assets near the cycle's low point, which is ideal timing because it would enable the company to capitalize on the next cyclical recovery and expansion.

A deal for Shell's U.S. chemicals assets would also enable ExxonMobil to continue to diversify beyond oil and gas. Exxon already has a meaningful product solutions portfolio (energy, chemical, and specialty products) that it's investing heavily to expand, including new products like Proxxima. Exxon currently aims to deliver $9 billion in earnings growth from its product solutions businesses by 2030, at constant margins relative to 2024, driven by investments to expand its high-margin products and achieve structural cost savings.

A potential deal looks like a good strategic fit

ExxonMobil is reportedly one of four bidders for Shell's chemicals assets. It might not emerge as the winning bidder, given the competition. It's also possible that even if it has the highest bid, Shell opts to hold on to the assets in hopes that the continued recovery in the chemicals market will enable it to fetch a higher price in the future.

However, if Exxon wins the bidding, it looks like a very smart strategic acquisition. It would meaningfully expand its domestic chemicals business at an attractive price. That greater scale would provide opportunities to capture synergies that could make its entire chemicals business even more profitable in the future. That makes this potential deal an interesting one for ExxonMobil investors to keep an eye on, as it could further enhance the already strong long-term investment thesis that makes it a top oil stock to buy.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Kimberly Clark (NASDAQ: KMB) isn't a household name, although the consumer staples giant's products are in most households. It's also not that well-known among investors, even though it has a streak of 54 consecutive years of dividend increases, rivaling PepsiCo (NASDAQ: PEP). PepsiCo has far greater brand recognition because almost everyone knows its namesake beverage, whereas few would associate Huggies, Kleenex, and Cottonelle with Kimberly Clark.

Here's a closer look at this Dividend King (a company with 50 or more years of consecutive annual dividend increases), which deserves more attention from dividend investors.

Image source: Getty Images.

A boring dividend stock

Kimberly Clark raised its dividend from $1.26 per share to $1.28 per share this past January, extending its dividend growth streak to 54 years in a row. The consumer staples company has now paid dividends for 92 straight years. PepsiCo, which extended its streak to 54 years in June with a 4% raise, has now paid a dividend each year since 1965.

PepsiCo has spent a fortune on marketing to build a global beverage brand around its iconic name. That brand image has made it easily recognizable in the investor community. Kimberly Clark also spends a lot of money on marketing. That's why its portfolio of household product brands holds No. 1 or No. 2 market share positions in about 70 countries and serves one in every four people globally each day. However, that hasn't translated into a well-known corporate brand.

As a result, many income investors are unfamiliar with the company. That's causing them to overlook a top dividend stock that offers an even more enticing yield than PepsiCo (4.7% vs. 4.1%).

The company's products benefit from durable, growing demand, with demand for its basic household products even more resilient than that for PepsiCo's beverage and snacking products. Meanwhile, it's taking a major step to enhance its global portfolio by acquiring consumer health products brand Kenvue, which could help drive growth (including the dividend) for years to come.

With a PepsiCo-like dividend growth streak and a higher-yielding payout backed by a more resilient portfolio, income-focused investors should know Kimberly Clark.

Matt DiLallo has positions in PepsiCo. The Motley Fool recommends Kenvue. The Motley Fool has a disclosure policy.

ExxonMobil (NYSE: XOM) highlighted in its second-quarter earnings report that it made a Final Investment Decision to expand Proxxima's blending capacity in Louisiana. Unless you follow ExxonMobil closely, and maybe even if you do, you probably have no idea what this material is. Launched in 2023, Proxxima is a proprietary polyolefin thermoset resin system that makes a range of products stronger and lighter than those made from alternative materials.

Here's why the continued expansion of its Proxxima business matters for ExxonMobil investors.

Image source: The Motley Fool.

What is Proxxima?

Thermoset resin is a polymer material that permanently hardens through an irreversible chemical process. ExxonMobil used advanced polymer technology to produce a new range of resin systems designed to outperform existing materials. It's Proxxima products are two-part resin systems for composites, coatings, and neat molded polymer applications. They feature a liquid resin formulation for product performance plus a catalyst formulation designed for processing speed.

Proxxima is a high-performance alternative to traditional materials such as epoxy, polyurethane, vinyl ester, and polyester. It's adaptable, lightweight, and incredibly durable. It has a range of current applications, including wind turbine components, coating subsea pipelines, rebar, automotive parts, and industrial coatings.

Proxxima is a big part of ExxonMobil's future

Oil and gas remain ExxonMobil's core business. The oil giant plans to invest billions of dollars in the coming years to continue finding and developing new hydrocarbon resources.

However, ExxonMobil's business model is much more diversified than those of other energy companies. It also has refining, chemicals, and lower-carbon energy businesses. Its products solutions segment (energy, chemical, and specialty products) is a meaningful contributor to its earnings. These products generated a combined $9.8 billion in adjusted earnings during the first half of the year, compared to $15.5 billion in adjusted earnings from its upstream oil and gas business.

Proxxima is a small but growing specialty product category for ExxonMobil. The company completed the first phase of the Proxxima business scale-up last year. It completed the retrofit and expansion of a blending facility in Texas, which started operations in June 2025. It also finished a raw materials facility in Texas last year. The company is now moving forward with a 120,000-ton-per-year expansion of Proxxima's blending capacity in Louisiana. This project will add a significant supply to meet growing customer demand.

By 2030, Exxon expects its products solutions business to deliver $9 billion in earnings growth at constant margins compared to 2024's level, with high-value products and new businesses like Proxxima systems and carbon materials contributing 40% of its earnings growth potential. Longer-term, Exxon expects its growing new businesses, including Proxxima, will reach $13 billion in earnings by 2040. It sees a $100 billion future total addressable market opportunity for Proxxima systems and carbon materials.

Building an energy company for the future

ExxonMobil will be an oil and gas company for years to come. However, the company is investing in building several new, lower-carbon businesses for the future, including Proxxima. That business is growing due to strong customer demand. It's a core part of Exxon's strategy to build a more diversified and lower-carbon energy company. This strategy is one of the many reasons that make it one of the top oil stocks to buy.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The Metals Company (NASDAQ: TMC) believes it's sitting on a treasure trove of critical metals. The problem is that they're buried under a literal ocean of water. Additionally, it has some big regulatory and execution risks. Those are just some of the reasons why I won't touch this metals stock.

However, it's an interesting company to keep an eye on, given the demand boom for critical metals.

Image source: Getty Images.

Buried treasure

The Metals Company holds rights to a massive stretch of seabed in the Pacific Ocean off the U.S. West Coast known as the Clarion Clipperton Zone. It holds an estimated 1.6 tonnes of polymetallic nodule resources. These potato-sized rocks contain nickel, copper, cobalt, and manganese. The company estimates that the combined net present value of its resources is $23.6 billion. Those metals are critical for electric vehicle batteries, renewable energy, and many other applications.

It's taking a unique regulatory path for approval to extract these resources. While the U.N. would normally govern deep-sea mining under its affiliated International Seabed Authority, it has never finalized commercial mining rules. That's leading The Metals Company to seek NOAA's approval under the Deep Seabed Hard Mineral Resources Act of 1980, which is a faster, clearer regulatory path. It currently expects to receive a permit before its late 2027 target to commission its offshore collection system. The company is also working to secure funding from the U.S. government to support its plan to build module processing and refining capacity in the U.S.

Why I'm going to pass for now

There's no doubt that The Metals Company holds immense promise. However, the risk is just as big, if not greater.

A major risk is its chosen regulatory path. It's bypassing the international approval framework by going directly to U.S. regulators. Even if NOAA approves the permit, it might not receive the needed international recognition as the final authority. Dozens of countries have already called for a moratorium or a pause on deep-sea mining due to the potential impacts on the marine environment. It will likely face legal challenges if it moves forward after receiving a NOAA permit.

The risks don't end there. The Metals Company is a pre-revenue company that's years away from production (at the earliest, 2027). It ended the second quarter with $143 million in cash after burning through $20.1 million in the period. It's going to need a cash infusion at some point, either through government funding or capital market transactions, to fund its operations and the build-out of its facilities and equipment. Even the build-out is risky, as this is a first-of-its-kind project that isn't yet commercially proven.

There are better ways to bet on growing metals demand

The world will need a lot more nickel, cobalt, and copper in the coming years to support electric vehicles, battery storage, and AI data center demand. The Metals Company could one day play a critical role in supporting this demand. However, it's a risky bet due to its regulatory strategy and financial picture. That's why I don't plan to touch the stock for now, and would consider buying a more established metal stock while I wait to see how these risks play out.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

American States Water (NYSE: AWR) rather quietly raised its dividend by 8.2% last month. This pay bump extended its dividend growth streak to an impressive 72 straight years. That kept its name at the top of the Dividend Kings list as it remains one of fewer than 60 companies with 50 or more years of annual dividend increases. The sleepy water utility has now paid 361 consecutive quarterly dividends.

Here's why more investors should be talking about this boring utility stock.

Image source: Getty Images.

Small, but mighty

American States Water doesn't have the name recognition of other Dividend Kings, like Coca-Cola or Johnson & Johnson, because it's not an iconic consumer brand. Instead, it's easily confused with another water utility, American Water Works, which is the largest regulated water and wastewater utility in the country with over 14 million customers across 14 states.

American States Water, on the other hand, has 1 million customers in 10 states. It operates two utilities, Golden State Water Company and Bear Valley Electric Services, which provide regulated water and electricity services to customers in California. It also owns American States Utility Services, which operates and maintains water distribution, wastewater collection, and treatment facilities at 12 military bases under long-term contracts. Those boring businesses generate very stable cash flow.

The utility grows by investing capital to support rising water and power demand among its customers, enabling it to file for rate increases that regulators approve. It's regulated utilities plan to invest $185 million to $220 million this year to support continued demand growth. Additionally, American States Water will acquire new water systems. For example, it agreed to buy a new water system in California for almost $5.3 million earlier this year. These investments help drive steady earnings growth.

American States Water has grown its dividend at an 8.7% compound annual rate over the last decade. That has helped drive a 10.4% annualized total return. With a current yield of roughly 2.5%, a target of more than 7% compound annual dividend growth, and a 72-year dividend growth track record, American States Water is a stock that more investors should be talking about.

Matt DiLallo has positions in Coca-Cola and Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

ExxonMobil (NYSE: XOM) recently warned Kazakhstan that the Central Asian nation's largest oil field, Tengiz, will hit its production peak next year. Worse yet, output from the field will begin to decline. Exxon estimates it will fall nearly 40% by 2035 to around 500,000 barrels per day (bpd). That also has implications for Chevron, as it helped develop the field through its 50% interest in the Tengizchevroil (TCO) partnership.

However, while Tengiz is about to plateau and decline, that's not a crisis for ExxonMobil. Here's why.

Image source: The Motley Fool.

There's more in the tank in Kazakhstan

Even though output at Tengiz is about to peak and start declining, Exxon has another opportunity in Kazakhstan: Kashagan. The giant offshore field in the Caspian Sea is operated by a partnership that includes Exxon, Shell, TotalEnergies, and others. Exxon sees the potential for an $80 billion joint investment to develop the western part of the field. This expansion could produce up to 600,000 bpd.

However, the field is part of a long-running dispute between Kazakhstan and the operating consortium. Kazakhstan levied a $5 billion environmental fine that the field's operator hasn't paid. Additionally, the government says the partners owe it $150 billion for lost revenue due to development delays, a claim currently before international arbitration. Exxon and its partners won't invest the capital needed to boost production in this field until they resolve the dispute with the government.

Exxon has plenty more growth elsewhere

Kashagan is far from Exxon's only potential growth driver. The oil giant is currently investing $100 billion through 2030 on major capital projects. These investments will grow its oil and gas production from 4.7 million bpd last year to 5.5 million bpd by 2035. Major growth drivers include Guyana, LNG, and the Permian Basin.

The company expects to double its production in the Permian Basin alone by 2030 to about 2.5 million bpd. It recently signed new 20-year, fee-based integrated midstream agreements with Targa Resources (NYSE: TRGP) to support its growth in the Permian in the coming years. Targa will build three new natural gas processing plants to support Exxon's development in the region and is evaluating five additional plants. It's also building a new 70-mile gas pipeline to support Exxon's growth. Targa plans to start operations on this new infrastructure by the first half of 2028.

Meanwhile, Exxon recently awarded $1.1 billion in pre-investment contracts for equipment for the Rovuma LNG project in Mozambique. The company is on track to make a Final Investment Decision on the potential $30 billion project by the end of this year. Exxon could also approve an LNG project in Papua New Guinea by the end of this year. These projects will help drive growth beyond 2030.

Exxon's growth engine isn't running low on fuel

While production at one of Exxon's major oil fields is about to peak and start declining, that's not a crisis for the oil giant. It has another potential major project in Kazakhstan in the pipeline. On top of that, it has visible growth in the Permian, two more LNG projects in the works, and many other opportunities worldwide. While there are risks associated with both Kashagan and Rovuma (the latter has been delayed by regional violence since 2021), Exxon's diversified growth pipeline helps mitigate these risks. Exxon's multiple long-term growth drivers make it one of the top oil stocks to buy.

Matt DiLallo has positions in Chevron. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.

I'm building additional passive income streams to supplement my paycheck. Every month, I receive dividend payments from Realty Income (NYSE:O), Main Street Capital (NYSE:MAIN), and EPR Properties (NYSE:EPR). It's like getting another paycheck each month, except I didn't have to do any work for the money.

I like investing in these monthly dividend stocks because the recurring cash flow gives me a set amount to reinvest each month until I retire, when it will then help cover some of my living expenses. That beats the lumpier quarterly cadence of most other dividend stocks. Here's a look at why I chose this particular trio of monthly dividend payers.

Image source: Getty Images.

The Monthly Dividend Company®

Realty Income is the gold standard among monthly dividend stocks. The real estate investment trust (REIT) has declared 674 consecutive monthly dividends. It has raised its payment for 115 consecutive quarters and 135 times since its 1994 listing on the NYSE. The REIT has increased its payment annually for more than three decades, growing it at a 4.1% compound annual rate. It's as consistent an income stock as they come.

The REIT currently has a dividend yield of more than 5% (well above the S&P 500's 1% yield), which is on rock-solid ground. Realty Income has a well-diversified portfolio of properties (retail, industrial, gaming, and data centers) secured by long-term net leases with many of the world's leading companies. Those leases provide it with very stable and durable rental income. Meanwhile, Realty Income has a conservative dividend payout ratio (less than 75% of its adjusted funds from operations) and a fortress balance sheet (A-rated). That strong financial profile, along with a growing list of strategic partners, gives it the funding capacity to invest billions of dollars into income-generating real estate each year to support its steadily rising dividend.

A sustainable monthly income stream and more

Main Street Capital is a business development company (BDC) that invests in small private companies. It makes debt and equity investments that provide it with interest and dividend income, as well as capital appreciation potential.

As a BDC, Main Street Capital must distribute at least 90% of its taxable net income to shareholders in dividends. It primarily does that through its monthly dividend, which it set at a sustainable level (its distributable net investment income covered its monthly payment by nearly 1.4 times in the second quarter). Main Street Capital has never cut or suspended its monthly dividend since its 2007 IPO. Instead, it has grown the payout by 141% since its IPO, including 12 times since 2021, and by 3.9% over the last 12 months. At its recent stock price and monthly rate, Main Street's base yield is more than 5%.

Additionally, Main Street periodically pays supplemental quarterly dividends to ensure compliance with IRS regulations. It has paid a supplemental dividend for 20 straight quarters and maintained its current rate of $0.30 per share since early 2024. This additional payment currently boosts its annualized dividend yield to over 7%.

The income thriller

EPR Properties is another REIT. It focuses on owning experiential real estate, such as movie theaters, eat-and-play venues, amusement parks, and other attractions. It leases these properties to operating tenants under long-term, primarily triple-net leases.

The REIT has taken income investors on a roller coaster ride over the past several years. It suspended its dividend during the pandemic due to its impact on the theater industry and reinstated it at a lower rate. While the REIT has been steadily increasing its monthly dividend over the past five years, it remains below the pre-pandemic rate. That's allowing it to retain additional income to fund new investments.

EPR Properties has spent the past several years enhancing its portfolio by selling off theaters and investing in other experiential properties. For example, it bought seven regional theme parks from Six Flags for $315 million this year and leased them to two new tenants. It also spent $113 million late last year on a five-property golf-course portfolio and a water park. These investments are growing its earnings, enabling EPR to raise its dividend (5.1% increase in early 2026). While EPR Properties has a higher risk profile, it also offers a higher current yield at almost 6%.

A three-part monthly paycheck

I own Realty Income, Main Street Capital, and EPR Properties largely because they pay above-average monthly dividends, which gives me a bankable stream of recurring income to reinvest each month. Realty Income is my income anchor due to its exceptional track record, financial strength, and durability. Main Street Capital also provides a bankable monthly income stream and gives me a little extra cash each quarter. Finally, EPR Properties provides a bit of an income boost thanks to its higher yield, which I think is worth the higher risk since it's part of the income strategy, not the foundation. All three work together to support my investment income goals.

Matt DiLallo has positions in EPR Properties, Main Street Capital, and Realty Income. The Motley Fool has positions in and recommends EPR Properties and Realty Income. The Motley Fool recommends Six Flags Entertainment. The Motley Fool has a disclosure policy.

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) has delivered a 13.4% annualized total return since its inception in 2011, while growing its payout at an 11.2% compound annual rate since 2017. If the dividend ETF maintains its current pace, the share price would grow from $35 to around $90 by the end of 2035, while the yield on cost would rise from 3.1% to over 8% by then.

Here's a look at what drives that view.

Image source: Getty Images.

High income and growth

The Schwab U.S. Dividend Equity ETF has been a compounding machine. The share price has risen at an average annual rate of around 10% since inception. Add in the high-yielding dividend (SCHD currently yields 3.1%), and the annualized total return is 13.4%. That's a fantastic return for a lower-risk, dividend-focused investment. A big driver of those returns is the rapidly rising dividend.

If the ETF's price continues to grow by more than 10% annually, it would approach $90 a share by the end of 2035. That's a more than 150% increase. Meanwhile, if the dividend continues to grow at its recent historical pace of more than 11%, it would rise from the current annualized rate of $1.05 per share to over $2.90 per share by the end of 2035. That's more than an 8% yield at the current cost.

Now, there are lots of caveats here. SCHD is a collection of 100 high-yielding dividend stocks based on an index that revamps its holdings once a year. The current group of company have only grown their dividends at a 9.4% annualized rate over the last five years, though that's a tick faster than the prior iteration's 8.6% five-year average annual rate. If the fund's dividend growth rate slows in the future, it would likely fall well short of the projected 2035 income level and share price.

However, the fund has an excellent long-term record of investing in higher-yielding companies that deliver above-average dividend growth and stock price appreciation. That makes it a great core, wealth-building holding for any portfolio.

Matt DiLallo has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The Invesco QQQ Trust (NASDAQ: QQQ) currently trades at more than $710 a share. So, if you have $750 to invest right now, you could buy one share of this top ETF and have a little cash left over.

Here's why that would be a smart investment right now.

Image source: Getty Images.

The top growth stocks in one fund

The Invesco QQQ Trust is one of the world's best ETFs. It ranks in the top 1% of large-cap growth funds by 15-year total return and is the second-most traded ETF in the world.

Buying one share of this world-class ETF gives you exposure to the Nasdaq-100, an index that tracks 100 of the largest non-financial stocks on the Nasdaq stock exchange. So, one share buys you a piece of 100 top-flight companies, with a heavier concentration in the largest ones. Here's a quick look at its five largest holdings and how much of your roughly $710 investment would get allocated into each one:

• Nvidia: 8.4% of the fund ($59.64).
• Apple: 7.4.% ($52.54)
• Microsoft: 5.7% ($40.47).
• Micron Technologies: 4.7% ($33.37).
• Amazon: 4.6% ($32.66).

Investing your $750 in this fund is a smart move because it eliminates single-stock risk without sacrificing much potential return. This ETF has delivered more than 1,600% since its launch in 1999, crushing the S&P 500's return of less than 860%. From another perspective, if you had invested $750 in the fund at its launch, it would now be worth over $10,450.

It has significant growth potential ahead. All five of its top holdings are leaders in AI, which has helped drive the fund's recent returns and should continue to power future returns. According to a McKinsey estimate, global capital spending on data centers alone will reach nearly $7 trillion by 2030. That spending should drive robust growth for Nvidia and Micron during the near-term build-out, and eventually accelerate growth for tech companies like Apple, Microsoft, and Amazon.

It currently costs less than $750 to buy a share of QQQ, which gives you stakes in all the fastest-growing tech stocks. The fund's broad exposure to the AI megatrend makes it such a smart long-term investment. It has the potential to grow that rather small investment into a much bigger future payday.

Matt DiLallo has positions in Amazon, Apple, and Invesco QQQ Trust and has the following options: long June 2028 $180 calls on Amazon, short September 2026 $280 calls on Amazon, and short September 2026 $300 calls on Apple. The Motley Fool has positions in and recommends Amazon, Apple, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

I think Realty Income (NYSE: O), not a tech stock like Microsoft (NASDAQ: MSFT) or Apple (NASDAQ: AAPL), is the best dividend stock to buy for passive income. While tech companies can deliver growth, Realty Income provides income investors with growth and two things tech stocks don't offer: yield and monthly payments.

If generating passive income is your goal, the real estate investment trust's (REIT) high-yielding (over 5%) and steadily rising monthly dividend stands out as the best option.

Image source: Getty Images.

Why not tech dividend stocks?

Tech stocks can actually make great dividend stocks. Many have excellent records of growing their dividends. For example, Microsoft has increased its dividend for more than 20 straight years. It has grown its payout at a 9.7% compound annual rate over the past decade, including by 10% last September. Meanwhile, Apple has delivered 15 years of annual dividend increases, growing its payout at a 7% compound annual rate over the past decade, including 4% earlier this year.

The issue is their current yields. Microsoft's is 0.8%, while Apple's is 0.3%. That's not a lot of income. It's below the S&P 500's roughly 1% yield. While those dividends will likely continue to grow at solid rates, it will take a long time before either can provide investors with a meaningful passive income stream. For example, if Microsoft continues to grow its dividend at a 10% compound annual rate over the next decade, an investor's yield on cost would only be 2.1% in 10 years. Meanwhile, Apple's would only rise to 0.6% if it continues to grow its payout at a 7% compound annual rate over the next 10 years.

What makes Realty Income the best dividend stock

Realty Income's stated mission is to "deliver dependable monthly dividends that increase over time." The REIT takes being a monthly dividend stock seriously. It calls itself The Monthly Dividend Company®, a registered trademark of Realty Income. It has made 674 consecutive monthly dividends throughout its history. For income investors, that payment frequency trumps the quarterly schedules of most other companies, including tech stocks.

The other part of its mission is to increase its dividend over time. With 135 increases since its public market listing in 1994, including the last 115 consecutive quarters, it's certainly delivering on that mission. The REIT has grown its dividend at a 4.1% compound annual rate since going public. While it's not growing its payout as fast as most tech stocks, it's still delivering dependable growth, and with more frequency than tech stocks, which aim for annual dividend increases.

Finally, as already highlighted, Realty Income offers a much higher dividend yield than most tech stocks, at over 5%. That's not a high-risk income stream either. Realty Income generates very stable cash flow backed by a diversified portfolio of real estate properties secured by long-term triple-net leases. It has a conservative dividend payout ratio for a REIT (less than 75% of its adjusted funds from operations). It also has an A-rated balance sheet, a testament to its financial strength.

A top dividend stock typically combines four things: An attractive yield, a conservative payout ratio, a multi-year track record of payment growth, and a strong financial profile. Realty Income checks every box. Its 5% yield is several times the S&P 500's level. Its 75% payout ratio is conservative for a REIT. It has delivered more than 30 years of dividend growth. And to top it all off, it has a fortress financial profile.

Realty Income is the best dividend stock for income

Realty Income won't grow its dividend as fast as tech stocks and doesn't have as high a yield as some other dividend stocks. It's also not without risk, including the impact of interest rates on its ability to borrow money to fund new investments.

However, when you look at the total package, including its monthly payments, Realty Income stands out as the best dividend stock to buy for those seeking passive income. It provides a high-yielding monthly income stream that tech stocks can't match. Meanwhile, it offers steady growth, which comes more frequently than the annual increases of most other companies. These features make Realty Income the quintessential dividend stock.

Matt DiLallo has positions in Apple and Realty Income and has the following options: short September 2026 $300 calls on Apple. The Motley Fool has positions in and recommends Apple, Microsoft, and Realty Income. The Motley Fool has a disclosure policy.

The Vanguard Information Technology ETF (NYSEMKT: VGT) has delivered a monster 24% annualized return over the last decade. If the fund maintains its pace over the next 10 years, it would grow from today's price of around $120 a share to more than $1,000 per share.

The fund's past performance doesn't guarantee similar returns in the future. However, the Vanguard Information Technology ETF's heavy allocation to AI semiconductor giants Nvidia and Broadcom bodes well for its future return potential.

Image source: Getty Images.

Loaded with growth

VGT has been a strong performer since its inception in 2004 with a 14.6% annualized return. Its performance has been really strong over the past decade, including one-, three-, and five-year annualized returns ranging from 17.8% to 31.7%. That's due in large part to the robust performance of semiconductor stocks, which are crucial for AI. For example, Broadcom and Nvidia have delivered eye-popping annualized returns of 35.5% and 63.8%, respectively, over the past decade, helping drive this fund's robust performance.

They should continue to be major contributors to its future success. Nvidia is the fund's top holding, with a large 17.2% allocation. Meanwhile, Broadcom currently ranks fourth at 4.2%. The fund has meaningful allocations to all the top tech and AI stocks.

That's worth noting because most analysts believe we're still just in the early stages of the AI infrastructure build-out. According to a Deloitte outlook, global semiconductor sales alone are expected to more than double from $975 billion this year to $2 trillion by 2036. That should drive continued robust growth for Nvidia and Broadcom. That's just one catalyst for this fund.

While VGT has robust return potential over the next decade, it's not without risks. There's growing competition in the AI semiconductor space, which could compress profit margins over the next decade. Additionally, there is a risk that AI might not deliver the productivity gains many envision, which could lead to slower spending.

That caveat aside, the Vanguard Information Technology ETF offers the opportunity to passively invest in one of the biggest megatrends in history. If AI comes even close to delivering on the promise many see in the technology, the fund could easily top $1,000 per share by 2036.

Matt DiLallo has positions in Broadcom. The Motley Fool has positions in and recommends Broadcom and Nvidia. The Motley Fool has a disclosure policy.

The iShares Core Dividend Growth ETF (NYSEMKT: DGRO) passively tracks an index made up of U.S. companies with a history of dividend growth. However, that index, the Morningstar U.S. Dividend Growth Index, won't include a company unless it passes two strict tests:

1. It must have increased its dividend for at least the past five straight years.
2. It must have a positive earnings forecast and a payout ratio below 75%.

Additionally, the index excludes REITs and companies with a dividend yield in the top 10% of the dividends screened (after excluding REITs). Here's why these two strict tests matter.

Image source: Getty Images.

Shifting the dividend focus from current to future income

Many of the largest and most popular dividend ETFs screen for dividend yield (e.g., SCHD and VYM). That's because their primary focus is on generating current income for investors. The iShares Core Dividend Growth ETF has a different focus. It aims to deliver dividend growth. Stocks with a high dividend payout ratio (often those with high yields) are at a greater risk of dividend reduction and underperformance. That's abundantly clear in the long-term data on companies by their dividend policies:

Data source: Ned Davis Research and Hartford Funds. Note: Returns are based on S&P 500 members from 1973-2025.

The fund wants to ensure it tracks dividend growers, which is why it screens for companies with a history of growth and won't let companies with high payout levels in since they're at higher risk of maintaining their current payout, or worse, cutting or eliminating it. Those weaker companies would drag down the fund's returns and income over the long term.

Putting the rules into practice

The five-year dividend growth rule is a useful framework because these companies have demonstrated a genuine commitment to dividend growth. They have proven that they aren't just increasing their dividends when conditions allow, but have built a durable business that can deliver a sustainable, growing income stream to investors. It also screens out companies that don't have a proven dividend growth track record, such as those that just started paying dividends or had paused growth and recently resumed.

For example, the fund's top holding, Microsoft (NASDAQ: MSFT), has increased its dividend every year for more than two decades. That's a proven record of dividend durability and growth.

Meanwhile, the 75% or less dividend payout rule helps ensure dividend stability. It shows that the company is generating enough cash to cover its current payment while retaining some earnings to fund growth. It also gives the company a cushion to continue growing its dividend if it hits a rough patch.

Many of its holdings are well below that benchmark. For example, Microsoft generated nearly $183 billion in cash from operations during its 2026 fiscal year. That easily covered the $26.4 billion it paid in dividends. Microsoft's 14% payout ratio leaves it lots of room to grow.

Grow your dividend income with DGRO

DGRO tracks an index with two strict tests for dividend stocks that help ensure its holdings can sustain and grow their dividend payments. While it yields less than other dividend funds (less than 2% over the last 12 months), the dividend should grow over time. That growth should also enhance the fund's total return, which has averaged 12.2% annualized since its inception in 2014.

Matt DiLallo has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends Microsoft and Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.

Iraq has a bold ambition for its oil industry. The country recently sent a delegation to Saudi Arabia seeking a higher production quota from OPEC, aiming to boost its output to between 8 million and 10 million barrels per day (bpd) within the next six years. That's more than double the 4 million bpd it produced before the war with Iran slowed oil flows through the Strait of Hormuz.

This move could have a major impact on Chevron (NYSE:CVX), which recently signed memorandums of understanding (MOUs) with the Iraqi government to enter two oil fields in the country. Here's a look at the leading role Chevron could play in Iraq's oil resurgence.

Image source: The Motley Fool.

Chevron could be crucial to Iraq's plans

Last month, Chevron signed MOUs with Iraq regarding the West Qurna 2 and Nassiriya oilfields. The first potential deal would see it assume operational control of one of the world's largest oil fields. West Qurna 2 currently produces 460,000 bpd, accounting for nearly 10% of Iraq's output and 0.5% of global supply. Iraq nationalized the field earlier this year due to U.S. sanctions on its previous operator (Russia's Lukoil). The field holds an estimated 13 billion barrels of oil. Iraq has previously stated that it wants to boost production in this field to between 750,000 and 800,000 bpd after Chevron takes over operations.

Meanwhile, Chevron initially signed an agreement in principle with Iraq for the Nassiriya project in 2025, which includes four exploration blocks and the development of producing fields. Nassiriya is a much smaller field today, but it has significant long-term growth potential. Iraq is targeting an initial production capacity of 600,000 bpd for this project within seven years of starting work.

While Iraq has several state-owned oil companies, including Basra Oil Company, which is temporarily operating West Qurna 2, it needs assistance from major global oil companies to provide the technical expertise and capital required to develop its fields to their full potential. In addition to Chevron, fellow oil giants TotalEnergies and BP have also recently signed new deals with Iraq. Meanwhile, ConocoPhillips bought an interest in BP Energy Company of Kirkuk to help support the ongoing redevelopment of four large-scale producing fields in the Kirkuk region of Northern Iraq. These deals provide major oil companies with the opportunity to invest in one of the world's largest oil-producing countries.

Lots of promise and risk

While Iraq had been producing 4 million bpd before the U.S. and Israel launched military strikes against Iran, its output cratered after Iran retaliated by attacking ships trying to pass through the Strait of Hormuz. At one point, its production tumbled to only 1.4 million bpd.

That's leading Chevron to simultaneously evaluate bypass pipeline options. While Chevron and its partners considered rebuilding an old pipeline system damaged by previous wars, that option no longer appears plausible. As a result, they would likely need to build a new pipeline through Syria, which would cost at least $15 billion and likely take four years to build. Even if built, the new pipeline likely wouldn't have enough initial capacity to handle all of Iraq's production, especially at double its pre-war level. That would leave Chevron with meaningful exposure to potential future disruptions to the Strait of Hormuz.

A higher risk, high-reward move

Chevron is working to secure commercial terms with Iraq that would give it control of one of the world's largest oil fields and another one with significant potential. It would add another major long-term growth driver for the oil giant. However, this move adds risk as Iraq currently relies almost entirely on the Strait of Hormuz to export its oil. Still, given Chevron's broad global production base, this seems worth the risk because it's such a rare opportunity to add two potentially world-class resources to its portfolio. It would enhance the long-term investment case that already makes Chevron one of the top oil stocks to buy.

Matt DiLallo has positions in Chevron and ConocoPhillips. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends BP and ConocoPhillips. The Motley Fool has a disclosure policy.

Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) jettisoned 16 stocks since new CEO Greg Abel took the reins earlier this year, including Domino's Pizza (NASDAQ:DPZ). The sale of Domino's marked a stark reversal as Berkshire had spent several quarters building up a nearly 10% stake in the pizza chain.

While Berkshire Hathaway's new CEO is getting out of Domino's stock, I'm still holding. Even though the pizza stock has hit a rough patch, I have confidence in the long-term growth story, including its ability to continue increasing the dividend.

Image source: Getty Images.

A cold slice of reality

There's a reason Abel dumped Domino's stock. It has lost about a third of its value since the second quarter of 2024, when Berkshire began buying shares, with most of that decline occurring this year. That's due to its slowing growth.

During the first quarter, Domino's same-store sales growth slowed to an anemic 0.4% internationally and 0.9% in the U.S., as it battled what CEO Russell Weiner called a "intensifying macro and competitive environment." The war with Iran and continued inflation are impacting customer sentiment, with inflation having a meaningful impact on lower-income customers. That's leading rivals to aggressively discount to grab market share. Same-store sales growth slowed further in the second quarter to 0.1% in both the U.S. and international markets.

A different appetite

Berkshire grabbed a slice of Domino's when Warren Buffett was still the CEO. He's no longer in charge of the company and its investment portfolio. New CEO Greg Abel has his own vision for the company, which he has started executing since taking over at the beginning of the year.

He embarked on a massive overhaul of the investment portfolio during the first quarter, dumping 16 positions, or a third of the portfolio. In addition to Domino's, Abel sold out of other very notable names, including Amazon, Visa, and Mastercard. Meanwhile, he significantly boosted the company's stake in Alphabet, tripling its holdings.

So, the sale of Domino's was more about Abel revamping Berkshire's entire investment portfolio than a specific vote against the stock.

My tastes haven't changed

While I acknowledge that Domino's is facing some headwinds, its recent issues haven't altered my view. Despite sluggish same-store sales growth, the company's overall growth remains solid. Global retail sales rose 3.4% in the first quarter and 3% in the second quarter, driven by a growing store footprint (955 net store growth over the last 12 months). As the CEO pointed out in the second-quarter earnings press release, the growing store count is adding new customers, which will "strengthen our long-term growth flywheel by engaging with our loyalty program, while their orders power our supply chain business, fuel store growth, and drive market share."

Meanwhile, the company is still generating lots of cash ($352.6 million year-to-date). Domino's is allocating that money to grow shareholder value. It's investing in the business, strengthening its balance sheet (leverage has fallen from 4.7x to 4.3x over the past year), and returning cash to investors. The company's board approved an additional $1 billion share repurchase program in the first quarter, which boosted the total remaining authorization to almost $1.3 billion at the time. It also hiked its dividend by another 15% earlier this year.

That growing dividend is one of the things I find most satisfying about the stock. Domino's has grown its dividend by nearly 112% over the past five years. It can easily afford its current payment level (2.4% yield). It paid out $68.2 million in dividends during the first half of this year, only about 22% of its free cash flow ($313.6 million). That leaves lots of room to grow the payout while it works to reignite its sluggish growth.

I share management's long-term conviction, not Abel's taste for change

Long-time CEO Russell Weiner stated in the second-quarter earnings release that: "My conviction in Domino's long-term growth potential remains as strong as ever...Domino's is uniquely positioned to continue gaining market share and delivering long-term value for shareholders."

I share that same conviction, even with the knowledge that Weiner has since announced he's stepping out of that role and becoming the Executive Chairman, with current COO Joe Jordan taking over as CEO. That internal succession is a sign of continuity, much as it was for Berkshire. I still believe the company can grow its earnings, dividend, and shareholder value over the long-term, which is why I plan to continue holding. And, given how cheap the stock has gotten, I'm considering grabbing another slice of Domino's.

Matt DiLallo has positions in Alphabet, Amazon, Berkshire Hathaway, Domino's Pizza, Mastercard, and Visa and has the following options: long June 2028 $180 calls on Amazon and short September 2026 $280 calls on Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Berkshire Hathaway, Domino's Pizza, Mastercard, and Visa. The Motley Fool has a disclosure policy.

Shares of USA Rare Earth (NASDAQ: USAR) currently trade right around $18. That's more than 50% below its 52-week high. Despite that sell-off, I don't think shares of the rare-earth miner are a bargain. Here's why.

Valued on promise, not profits

USA Rare Earth has grand ambitions. The company aims to become a global leader in supplying critical minerals and advanced materials, and in producing rare-earth elements, oxides, metals, and magnets. It's building a fully integrated mine-to-magnet business that already includes a deposit in Texas and manufacturing operations in Oklahoma. The company recently took a major step toward becoming a global rare-earth leader by agreeing to acquire Serra Verde Group for $2.8 billion. It's also investing in expanding its processing capabilities through its recent investment in Carester. Additionally, it plans to build a new rare-earth metal and magnet manufacturing operation in South Carolina.

Image source: Getty Images.

After the 50% slump in its share price, USAR has a $4.5 billion market cap. That's a lot for a company that only generated $5.8 million of revenue during the second quarter. Meanwhile, it reported a $46.3 million loss from operations during the period and used $56.9 million in cash. On a more positive note, it ended the period with $1.5 billion in cash, giving it lots of breathing room.

It's hard to accurately value a company that's basically pre-revenue and years away from generating profits. Instead, you're buying into the promise that it can build a global leader in critical metals. There's certainly a lot of promise here, from the Serra Verde deal to a recent agreement with the U.S. Department of Commerce for up to $1.6 billion in federal funding to help support its growth plans. However, the company faces significant execution risk (Serra Verde integration and construction of the South Carolina facility) and financing risk (Serra Verde dilution and potential additional stock issuances). If USAR encounters any major setbacks, its share price could decline further. That's why it's not the best mining stock to buy if you're looking for a true bargain.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

We can learn a lot by looking back at how investments have performed over the long term. Here's how much dividend income you could be collecting today if you invested $10,000 each in three popular high-yield dividend stocks:

Data source: Company websites and Ycharts.

Those numbers alone don't tell the entire story. Here's a closer look at each of these high-yielding dividend stocks, which can teach us some valuable lessons about income investing.

Image source: Getty Images.

AGNC Investment: The big yield didn't last

AGNC Investment (NASDAQ:AGNC) traded right around $20 per share 10 years ago. At the time, the mortgage REIT paid a monthly dividend of $0.18 per share. A $10,000 investment made a decade ago would have generated nearly $1,090 in annual dividend income at that rate, or a 10.9% yield. Today, the income stream is 33% lower.

So, what went wrong? AGNC Investment cut its monthly dividend in 2019 to $0.16 per share and again in 2020 to the current monthly rate of $0.12 per share. That's due to changes in interest rates over the years, which can meaningfully affect mortgage REIT earnings.

The good news is that AGNC Investment has been much more stable in recent years, maintaining its payout for 75 straight months. The REIT's dividend currently aligns with its returns, suggesting it can sustain its dividend, which currently yields almost 13% at its recent $11 share price (a 45% drop from a decade ago). While that's an enticing payout, the REIT's history suggests it's a higher-risk income stream, as investors have seen their income and share value drop in the last decade.

Ares Capital: The big yield keeps getting bigger

Ares Capital (NASDAQ:ARCC) has delivered a much better outcome for income-seeking investors over the last 10 years. A $10,000 investment in the business development company (BDC) a decade ago would have generated about $970 in dividend income in the first year at a going-in yield of roughly 10.7%. Whereas AGNC's dividend income has declined, Ares Capital's has grown 26%.

It's worth noting that the BDC didn't just increase its dividend payout ratio to deliver a higher dividend; it has grown its earnings over the past decade to support the higher payment. That earnings growth has contributed to its rising stock price (recently around $20 a share, up more than 27%), adding to its total return.

That's due to its strong loan underwriting capabilities (1% average annualized net realized gain in excess of losses since its IPO) and its ability to grow its investment portfolio accretively. Its long track record of growing shareholder value includes 17 years of dividend stability and growth.

ONEOK: The high-octane dividend grower

ONEOK (NYSE:OKE) also showcases the power of dividend growth. A $10,000 investment into the pipeline stock 10 years ago would have generated about $495 in annual dividend income (a nearly 5% yield). Today, that investment would generate over $860 in annual dividend income, a 74% increase over the past decade.

Again, ONEOK didn't just hike its payout ratio; it delivered real earnings-per-share growth. The pipeline company has grown its earnings per share at a 13% compound annual rate since 2017, driven by high-return organic expansion projects and value-enhancing acquisitions. That has contributed to the nearly 95% increase in its stock price over the past decade (recently around $95 a share).

ONEOK showcases the power of dividend growth, as it now provides investors with much more income and a much more valuable investment.

Look at the total (return) picture

It's easy to get caught up in the allure of a high dividend yield. However, the more important factor to consider is growth, especially dividend growth. That growth can meaningfully add to a dividend stock's total return over the long-term. Just look at how much it has added to the returns of ONEOK and Ares Capital in the past 10 years:

OKE data by YCharts

ONEOK, which has always had a lower yield, has actually generated the highest total return of this trio over the past decade. Ares Capital isn't very far behind, as its growth has provided an additional boost beyond its high yield. AGNC Investment, on the other hand, has seen its total return dragged down by its falling share price.

While this past performance doesn't guarantee these high-yield stocks will deliver similar returns in the future, it shows the importance of shifting your focus from yield to dividend growth. Investing in a lower-yielding stock today, like ONEOK, could have a much bigger payoff in the future as it grows its earnings. Similarity, if income is your primary focus, a growing company like Ares Capital is often a better long-term investment than a yield-only play like AGNC Investment.

Matt DiLallo has positions in Ares Capital. The Motley Fool has positions in and recommends Ares Capital. The Motley Fool recommends Oneok. The Motley Fool has a disclosure policy.