Monday, July 23, 2012

Eight Income Stocks Boosting Investor Returns

Every week, I focus on the list of consistent dividend raisers, which announce dividend hikes. I define consistent dividend raisers as companies which have managed to reward shareholders with higher dividends for at least five years in a row. Below, I have listed each company which boosted distributions, grouped them by some common denominator, and then provided my take on the company.

Kinder Morgan Energy Partners, L.P. (KMP) operates as a pipeline transportation and energy storage company in North America. This master limited partnership raised quarterly distributions to $1.23/unit. Kinder Morgan is a dividend achiever, which has consistently boosted distributions for 16 years in a row. Yield: 5.80% (analysis)

Kinder Morgan, Inc. (KMI) owns and operates energy transportation and storage assets in the United States and Canada. The company operates in six segments: Products Pipelines-KMP, Natural Gas Pipelines KMP, CO2—KMP, Terminals KMP, Kinder Morgan Canada KMP, and NGPL PipeCo LLC. The company raised its quarterly distributions to 35 cents/share. The general partner of Kinder Morgan Partners has raised distributions consistently since going public in 2011. I like the above average yield coupled with the above average dividend growth rate. Yield: 4% (analysis)

Long-time readers know that I own i-share units of Kinder Morgan Management LLC (KMR), which distribute stock instead of cash distributions. That way I do not have to worry about K-1 forms on my investment in the partnership. Once I retire and need the cash flow however, I would probably end up selling KMR and purchasing KMP instead. Currently, if one is in the accumulation stage, it makes sense to purchase KMR, since it is trading at a steep discount to KMP. The partnership expects long-term distribution growth of 5%/year for limited partners. The partnership does expect low double digit long term distribution growth for the general partner interest, which is what Kinder Morgan Inc (KMI) offers. KMI owns the incentive distribution rights to Kinder Morgan Partners (KMP), which entitle it to 50% of distributions above a certain threshold. As a result, KMI offers a lower yield, but much faster dividends growth, which should translate into higher total returns than KMP. Over the past year, I have been a steady acquirer of Kinder Morgan (KMI) stock on dips, while for KMR I have simply reinvested distributions.

National Retail Properties, Inc. (NNN) is a publicly owned equity real estate investment trust. The company raised its quarterly distributions by 2.60% to 39.50 cents/share. This dividend achiever has boosted distributions for 23 years in a row. Yield: 5.30%

Overall I find National Retail Properties’ dividend to be at risk. The company had Funds from Operations of $1.57/share, and the annual dividend is slightly over that at the new rate. As a result, this stock is a hold at best.

The following two companies have managed to boost distributions for over ten years in a row, and seem attractively priced at the moment. I would be analyzing each in detail, before deciding if they have what it takes to keep rewarding shareholders with higher distributions over time:

The J. M. Smucker Company (SJM) engages in manufacturing and marketing branded food products primarily in the United States, Canada, and internationally. The company raised its quarterly dividend by 8.30% to 52 cents/share. This dividend achiever has raised distributions for 13 years in a row. Yield: 2.70%

Stanley Black & Decker, Inc. (SWK) provides power and hand tools, mechanical access solutions, and electronic security and monitoring systems primarily in the United States, Europe, Latin America, and Canada. The company raised its quarterly dividend by 19.50% to 49 cents/share. This dividend champion has raised distributions for 45 years in a row. Yield: 3%

Other companies raising distributions include:

Spectra Energy Partners, LP (SEP), through its subsidiaries, engages in the transportation of natural gas through interstate pipeline systems, and the storage of natural gas in underground facilities in the United States. This master limited partnership raised quarterly distributions to 48.50 cents/unit. Spectra Energy Partners has boosted distributions for 6 years in a row. Yield: 6.10%

TransMontaigne Partners L.P. (TLP) operates as a terminaling and transportation company. This master limited partnership raised quarterly distributions to 64 cents/unit. TransMontaigne Partners has boosted distributions for 8 years in a row. Yield: 7.40%

The Williams Companies, Inc. (WMB) operates as an energy infrastructure company in the United States. The company raised its quarterly dividend to 31.25 cents/share. Williams Companies has raised distributions for 9 years in a row. Yield: 4%

Since Spectra Energy, TransMontaigne Partners and Williams Companies have not boosted distributions for over ten years in a row, I would just add them to my list for further research.

Full Disclosure: Long KMR, KMI, NNN

Relevant Articles:

Kinder Morgan Energy Partners (KMP) Dividend Stock Analysis
General vs Limited Partners in MLP's
Dividend Champions - The Best List for Dividend Investors
Three Companies expecting high dividend growth and returns

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