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2 Top Cash-Cow Stocks

What do U.S. midstream giant Enterprise Products Partners L.P. (NYSE: EPD) and global industrial conglomerate Emerson Electric Co. (NYSE: EMR) have in common? They hail from different industries, but they each have made it a point of returning value to shareholders for decades by increasing cash disbursements. If you're looking for top stocks that are cash cows, then you need to get to know this duo.

1. Well covered

Enterprise Products Partners has given unitholders a raise annually for close to 20 years in a row. Even better, it's upped the distribution in each of the past 52 quarters. The partnership's yield is currently a hefty 6%, well more than the roughly 2% the broader market offers. The disbursement has grown at about 5% annually, easily beating the historical growth rate of inflation of around 3%.  

Image source: Getty Images

If that got your interest, and it should, then let's talk business. Enterprise is one of the largest midstream companies in the United States, operating pipelines, processing plants, and a fleet of ships, among many other things. Its business is largely fee-based, so oil and gas prices don't have that much of an impact on its business. To put a number on that, despite weak oil prices since mid-2014 that have put significant stress on even the largest oil companies and their dividends, Enterprise's distribution coverage hasn't fallen below 1.2 even though it has continued to raise the disbursement each quarter.    

Enterprise isn't resting on its past, either. Although it already has a collection of assets that would be difficult, if not impossible, for competitors to replicate, it's still building. The partnership has roughly $8.6 billion worth of projects in the works right now, with more on the drawing board. Enterprise is easily a top energy-industry stock that has proved to be a reliable cash cow today, and it has solid plans to remain one in the future.    

2. Industrial gear shift

If Enterprise's distribution record impressed you, how about Emerson Electric's 60 consecutive years of dividend increases? That streak puts the industrial giant in rare dividend company. The current yield is around 3.2%, well above the market. Although the 1% dividend increase over the past year is miserly, the company's average increase over the past decade is nearly 7.5%.    

EPD Dividend Per Share (Quarterly) data by YCharts

Let's take a closer look at those last two stats, since 1% dividend growth doesn't sound very good. The industrial space is cyclical, and the industry has been at a low ebb of late, with Emerson's sales from continuing operations down 11% last year. So in a difficult year it pulled back a little on dividend growth. That makes sense. Over longer periods, however, history suggests it will make that up. How? By changing with the times, something this 100-year-old-plus company has done many times before.    

Right now, that means selling business that aren't living up to expectations, such as the network power segment it jettisoned for $4 billion in late 2016, and using the proceeds to expand in areas in which management sees more potential, such as automation. The big driver being that margins in the automation business are much higher. While it's clearly too soon to say that the industrial market is on the upswing, Emerson's first-half results were strong enough for the company to increase full-year guidance -- excluding the impact of recent acquisitions.       

Some of Emerson's recent business shifts. Image source: Emerson Electric

Emerson is one of the largest industrial conglomerates in the world. It's dealing with a slowdown by refocusing on the areas where it sees the most future potential. And it has a history of rewarding investors that spans six decades. Things are tough now, but if history is any guide, this cash cow is worth a deeper look.

No bleeding here

There's one last distinction to make here. When you hear the term "cash cow" it often refers to a business that's being milked for cash without much concern for growth. That's not what Enterprise and Emerson are all about. They are not only trying to throw cash off to investors, but they're also working to ensure that those checks go up over time. That means investing in their businesses and shifting as their markets shift, an inherently growth-oriented focus. It's how they've gotten to be top players in their respective industries and top cash cows for your portfolio.

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Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Emerson Electric and Enterprise Products Partners. The Motley Fool has a disclosure policy.