The past week was the busiest week for dividends increases that I have noticed in my four and a half years as a dividend blogger. There were 66 companies which raised distributions. Apparently, no one bothered to inform these Board of Directors committees about the potential for steep increases in taxes on dividend income. I chose to highlight 25 of these companies that have been able to successfully raise dividends for over 5 years in a row. Corporations’ dividend policies are typically forward looking. Companies that announce dividend increases do so, only after a careful consideration of future economic and business factors, in order to make certain that it will be able to afford the increased payout. This vote of confidence shows that few corporate boardrooms consider the risk of increases in tax rates to be a big issue. This is also a vote of confidence in the business prospects for the next few years.
The companies which announced dividend increases over the past week included:
Johnson & Johnson (JNJ) engages in the research, development, manufacture, and sale of various products in the health care field worldwide. The company raised its quarterly dividend by 7% to 61 cents/share. This confirmed my prediction from early January, that the company will boost distributions to 61 cents/share. This marked the 50th consecutive annual dividend increase for this dividend king. Yield: 3.80% (analysis)
Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream. The company raised its quarterly dividend by 11.10% to 90 cents/share. This marked the 25th consecutive annual dividend increase for this dividend champion. Yield: 3.40% (analysis)
Exxon Mobil Corporation (XOM) engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products, as well as transportation and sale of crude oil, natural gas, and petroleum products. The company raised its quarterly dividend by 21.30% to 57 cents/share. This marked the 30th consecutive annual dividend increase for this dividend aristocrat. Yield: 2.65% (analysis)
International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. The company raised its quarterly dividend by 13.30% to 85 cents/share. This marked the 17th consecutive annual dividend increase for this dividend achiever Yield: 1.70% (analysis)
W.W. Grainger, Inc. (GWW) engages in the distribution of maintenance, repair, and operating supplies, as well as other related products and services for businesses and institutions primarily in the United States and Canada. The company raised its quarterly dividend by 21.20% to 80 cents/share. This marked the 41 consecutive annual dividend increase for this dividend aristocrat. Yield: 1.50% (analysis)
Parker Hannifin Corporation (PH) manufactures fluid power systems, electromechanical controls, and related components worldwide. The company raised its quarterly dividend by 5.10% to 41 cents/share. This was the second dividend increase in a year. This dividend king has raised dividends for 55 years in a row. Yield: 1.90%
Sunoco Logistics Partners L.P. (SXL) engages in the transport, terminalling, and storage of crude oil and refined products in the United States. The partnership raised its quarterly distributions to 42.75 cents/unit. This dividend achiever has raised distributions for 10 years in a row. Yield: 4.40%
AmeriGas Partners, L.P.(APU), through its subsidiary, AmeriGas Propane, L.P., operates as a retail and wholesale distributor of propane gas in the United States. The partnership raised its quarterly distributions to 80 cents/unit. This dividend achiever has raised distributions for 8 years in a row. Yield: 8.10%
Williams Partners L.P. (WPZ) focuses on natural gas transportation, gathering, treating and processing, storage, natural gas liquid fractionation, and oil transportation activities in the United States. The partnership raised its quarterly distributions to 77.75 cents/unit. Williams Partners has raised distributions for 8 years in a row. Yield: 5.50%
El Paso Pipeline Partners, L.P. (EPB) engages in the interstate storage and transportation of natural gas in the United States. The partnership raised its quarterly distributions to 89.50 cents/unit. El Paso Pipeline Partners has raised distributions for 5 years in a row. Yield: 5.90%
Magellan Midstream Partners, L.P. (MMP) engages in the transportation, storage, and distribution of petroleum products in the United States. The partnership raised its quarterly distributions to 84 cents/unit. This dividend achiever has raised distributions for 12 years in a row. Yield: 4.75%
Holly Energy Partners, L.P. (HEP) operates a system of petroleum product and crude pipelines, storage tanks, distribution terminals, and loading rack facilities. The partnership raised its quarterly distributions to 89.50 cents/unit. Holly Energy Partners has raised distributions for 8 years in a row. Yield: 5.90%
Vanguard Natural Resources, LLC (VNR), through its subsidiaries, engages in the acquisition and development of oil and natural gas properties in the United States. The partnership raised its quarterly distributions to 59.25 cents/unit. Vanguard Natural Resources has raised distributions for 8 years in a row. Yield: 8.30%
EV Energy Partners, L.P. (EVEP) engages in the acquisition, development, and production of oil and natural gas properties in the United States. The partnership raised its quarterly distributions to76.40 cents/unit. EV Energy Partners has raised distributions for 6 years in a row. Yield: 4.80%
Exterran Partners, L.P. (EXLP) provides natural gas contract operations services to customers in the United States. The partnership raised its quarterly distributions to 49.75 cents/unit. Exterran Partners has raised distributions for 6 years in a row. Yield: 9.10%
Artesian Resources Corporation (ARTNA), through its subsidiaries, provides water, wastewater, and engineering services on the Delmarva Peninsula. The company raised its quarterly dividend to 19.78 cents/share. This
dividend achiever has raised distributions for 14 years in a row. Yield: 4.10%
Cullen/Frost Bankers, Inc. (CFR) operates as the holding company for The Frost National Bank that offers commercial and consumer banking, and other financial products and services primarily in Texas. The company raised its quarterly dividend by 4.30% to 48 cents/share. This marked the 19th consecutive annual dividend increase for this
dividend achiever. Yield: 3.25%
UGI Corporation (UGI), through its subsidiaries, distributes and markets energy products and related services in the United States and internationally. The company raised its quarterly dividend by 3.80% to 27 cents/share. This marked the 25th consecutive annual dividend increase for this dividend champion. Yield: 4%
Bar Harbor Bankshares (BHB) operates as the holding company for Bar Harbor Bank & Trust that provides various banking products and services to individuals, businesses, not-for-profit organizations, and municipalities primarily in Hancock, Washington, and Knox counties. The company raised its quarterly dividend to 29 cents/share. Bar Harbor Bankshares has boosted distributions for 9 consecutive years. Yield: 3.10%
Cracker Barrel Old Country Store, Inc. (CBRL), through its subsidiaries, engages in the development and operation of the Cracker Barrel Old Country Store restaurant and retail concept in the United States. The company raised its quarterly dividend by 60% to 40 cents/share. This marked the tenth consecutive annual dividend increase for Cracker Barrel. Yield: 2.80%
BOK Financial Corporation (BOKF), a financial holding company, offers a range of financial products and services to commercial and industrial customers, and other financial institutions and consumers. The company raised its quarterly dividend by 15.20% to 38 cents/share. This was the second dividend increase in a year. BOK Financial Corporation has raised dividends for 7 years in a row. Yield: 2.80%
Ameriprise Financial Inc. (AMP), through its subsidiaries, provides a range of financial products and services in the United States and internationally. The company raised its quarterly dividend by 25% to 35 cents/share. This marked the ninth consecutive annual dividend increase for Ameriprise Financial. Yield: 2.70%
Sensient Technologies Corporation (SXT) and its subsidiaries engage in the manufacture and sale of colors, flavors, and fragrances worldwide. The company raised its quarterly dividend by 4.80% to 22 cents/share. This marked the seventh consecutive annual dividend increase for Sensient Technologies. Yield: 2.30%
The Gorman-Rupp Company (GRC) designs, manufactures, and sells pumps and related fluid control equipment and systems worldwide. The company raised its quarterly dividend by 11.10% to 10 cents/share. This marked the 40th consecutive annual dividend increase for this dividend champion. Yield: 1.35%
Valmont Industries, Inc. (VMI) produces and sells fabricated metal products, pole and tower structures, and mechanized irrigation systems in the United States and internationally. The company raised its quarterly dividend by 25% to 22.50 cents/share. This marked the 12th consecutive annual dividend increase for this dividend achiever. Yield: 0.70%
Full Disclosure: Long JNJ,CVX, XOM, GWW
Relevant Articles:
- Dividend Aristocrats List for 2012
- Should income investors worry about higher dividend taxes?
- Margin of Safety in Dividends
- Eleven Dividend Kings, Raising dividends for 50+ years
Monday, April 30, 2012
Friday, April 27, 2012
Enterprise Products Partners (EPD): A Pipeline Cash Machine
Enterprise Products Partners L.P (EPD). provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals in the United States, Canada, and Gulf of Mexico. Enterprise Products Partners is the largest pipeline master limited partnership in the US. This dividend achiever has managed to boost distributions to unitholders for 15 years in a row.
The largest competitors include Kinder Morgan Partners (KMP), Enbridge Energy Partners (EEP) and ONEOK Partners (OKE).
Since it went public in 1998, the partnership has had the following objectives in mind:
1) Invest in growth opportunities to build or acquire energy infrastructure that will generate returns on investment grate than longterm cash cost of capital
2) Provide partners with periodic increases in cash distributions and an attractive total return on investment
3) Preserve financial flexibility and maintain an investment grade balance
Few companies have specifically set the goal to increase distributions to their owners. The partnership has done a great job in accomplishing these goals.
The MLP has managed to grow organically, as well as through strategic acquisitions. In 2009, it acquired Teppco Partners, which provided geographic and business diversity to its operations. In 2011, Enterprise Products also completed the acquisition of Duncan Energy Partners. The 2010 merger with Enterprise GP Holdings, essentially eliminated incentive distribution rights, which typically cap distribution growth in mature MLPs. It has managed to balance distributions growth with the retention of distributable cash flows. As a result of the elimination of incentive distribution rights in 2010, the partnership’s cost of capital has been substantially decreased. This is good news for unitholders, because it means that there will be less of a need for raising capital exclusively through stock unit issuance.
Besides through acquisitions, Enterprise Products Partners is going to grow its portfolio of fee generating assets through its massive capital expansion program. The partnership expects to invest $6.50 billion in capital projects between 2012 and 2014, half of which will be related to Eagle Ford shale projects. These projects include over 300 miles of natural gas pipelines, a 600 million cubic feet per day cryogenic natural gas processing plant, 127 miles of NGL pipelines and 140 miles of crude oil pipelines. In the fourth quarter of 2011, the partnership completed the $1.50 billion dollar Haynesville Extension of its Acadian natural gas pipeline system. This 270-mile natural gas pipeline will have the capacity to transport up to 1.8 Bcfd of production from the Haynesville/Bossier Shale to industrial and utility markets in South Louisiana and, through connections with other pipelines, to markets in the northeastern and southeastern United States.
The ten year annual distribution growth has been 7.60%/year. At this rate, distributions would double every decade. The partnership is not a taxable entity, which means that income, gains, losses and any deductions or credits flow through on the individual unitholders’ tax returns. In addition, a large portion of MLP distributions are tax deferred. For example, I held EPD units for about 7 months in 2011, and almost all of my distribution income was tax deferred. It decreased my basis in the partnership, which means that when I sell, I will have to pay higher taxes. In addition, once my basis falls to zero, all the business income would be taxable as an ordinary income. Capital gains or losses will be treated as capital income, not ordinary. Investors in Master Limited Partnerships typically receive a Schedule K-1 ( Form 1065), instead of a 1099-DIV. Although this has scared most new investors in MLP, most tax software and even enterprising do it your self investors can handle MLP taxes easily.
Since the partnership distributes a large portion of its cash flows to unitholders, dividend payout ratio is not a good metric for evaluating distribution sustainability. Instead, the Distributable Cash Flow (DCF) is a metric that is commonly used when evaluating distributions. Essentially DCF is calculated by adding certain non-cash items such as depreciation to net income, in addition to a few cash related items. The partnership has one of the best distribution coverages in comparison to other MLPs. In 2011 it had a distributable cash flow of $3.737 billion, and distributed $2.027 billion. Granted, this DCF included $1 billion in cash proceeds from sales of assets, but it still shows how the company more than comfortably can afford to pay and even increase its distributions to unitholders.
I have accumulated the majority of my position in the partnership in the low to mid $40’s/unit. At the current distribution rate, a 5% entry yield corresponds to a price of $50.20/unit, while a 6% entry yield translates into an entry price of $41.83/unit. I would be more inclined to add to my position on dips below $42 - $44/unit.
Full disclosure: Long EPD, OKS, EEQ, KMR
Since it went public in 1998, the partnership has had the following objectives in mind:
1) Invest in growth opportunities to build or acquire energy infrastructure that will generate returns on investment grate than longterm cash cost of capital
2) Provide partners with periodic increases in cash distributions and an attractive total return on investment
3) Preserve financial flexibility and maintain an investment grade balance
Few companies have specifically set the goal to increase distributions to their owners. The partnership has done a great job in accomplishing these goals.
The MLP has managed to grow organically, as well as through strategic acquisitions. In 2009, it acquired Teppco Partners, which provided geographic and business diversity to its operations. In 2011, Enterprise Products also completed the acquisition of Duncan Energy Partners. The 2010 merger with Enterprise GP Holdings, essentially eliminated incentive distribution rights, which typically cap distribution growth in mature MLPs. It has managed to balance distributions growth with the retention of distributable cash flows. As a result of the elimination of incentive distribution rights in 2010, the partnership’s cost of capital has been substantially decreased. This is good news for unitholders, because it means that there will be less of a need for raising capital exclusively through stock unit issuance.
Besides through acquisitions, Enterprise Products Partners is going to grow its portfolio of fee generating assets through its massive capital expansion program. The partnership expects to invest $6.50 billion in capital projects between 2012 and 2014, half of which will be related to Eagle Ford shale projects. These projects include over 300 miles of natural gas pipelines, a 600 million cubic feet per day cryogenic natural gas processing plant, 127 miles of NGL pipelines and 140 miles of crude oil pipelines. In the fourth quarter of 2011, the partnership completed the $1.50 billion dollar Haynesville Extension of its Acadian natural gas pipeline system. This 270-mile natural gas pipeline will have the capacity to transport up to 1.8 Bcfd of production from the Haynesville/Bossier Shale to industrial and utility markets in South Louisiana and, through connections with other pipelines, to markets in the northeastern and southeastern United States.
The ten year annual distribution growth has been 7.60%/year. At this rate, distributions would double every decade. The partnership is not a taxable entity, which means that income, gains, losses and any deductions or credits flow through on the individual unitholders’ tax returns. In addition, a large portion of MLP distributions are tax deferred. For example, I held EPD units for about 7 months in 2011, and almost all of my distribution income was tax deferred. It decreased my basis in the partnership, which means that when I sell, I will have to pay higher taxes. In addition, once my basis falls to zero, all the business income would be taxable as an ordinary income. Capital gains or losses will be treated as capital income, not ordinary. Investors in Master Limited Partnerships typically receive a Schedule K-1 ( Form 1065), instead of a 1099-DIV. Although this has scared most new investors in MLP, most tax software and even enterprising do it your self investors can handle MLP taxes easily.
Since the partnership distributes a large portion of its cash flows to unitholders, dividend payout ratio is not a good metric for evaluating distribution sustainability. Instead, the Distributable Cash Flow (DCF) is a metric that is commonly used when evaluating distributions. Essentially DCF is calculated by adding certain non-cash items such as depreciation to net income, in addition to a few cash related items. The partnership has one of the best distribution coverages in comparison to other MLPs. In 2011 it had a distributable cash flow of $3.737 billion, and distributed $2.027 billion. Granted, this DCF included $1 billion in cash proceeds from sales of assets, but it still shows how the company more than comfortably can afford to pay and even increase its distributions to unitholders.
I have accumulated the majority of my position in the partnership in the low to mid $40’s/unit. At the current distribution rate, a 5% entry yield corresponds to a price of $50.20/unit, while a 6% entry yield translates into an entry price of $41.83/unit. I would be more inclined to add to my position on dips below $42 - $44/unit.
Full disclosure: Long EPD, OKS, EEQ, KMR
Relevant Articles:
Wednesday, April 25, 2012
Should income investors worry about higher dividend taxes?
I have structured my portfolio in a way, that I receive regular dividend payments every month, quarter or year. My secondary objective is to generate at least market average total returns. As an investor, my goal is to generate solid total returns. I achieve this by selecting companies, which will grow earnings, thus afford to pay higher dividends over time and hopefully will be able to sell at higher market prices in the meantime. I do not worry much about what the tax rates will be in 2013, or over the next four decades. I only worry about selecting great companies.
This might sound like heresy for many investors, who are anxiously hearing about the expiration of the current preferential treatment of dividends in 2012. This could mean that dividends will be taxed as ordinary income, the same way that bonds are taxed today. This could bring a potential 43.60% tax rate on the highest income brackets, if taxes are increased as well.
First, few people are actually making a lot with dividends. Research I have uncovered shows that the average investor in their 60’s does not make more than a few thousand dollars in annual dividend income. For a retired individual, even if dividends are taxed as ordinary income, they would likely not end up paying that much more in taxes. Of course, if you are a highly compensated lawyer or a company executive officer, chances are that you will be paying that high tax rate. Although no one likes paying taxes, there are few options that investors can choose.
One such option is to put all your money in tax-deferred accounts like IRA’s or ROTH IRA’s. Most investors typically have a large portion of their net worth tied up in IRA’s or 401 (k) plans. Unfortunately, 401 (k) plans do not offer investors much flexibility in investment options beyond the traditional mutual funds. Utilizing Roth IRA’s would essentially shield investors from paying any taxes during their accumulation period, as well as during their distribution period, as long as they take earnings out after the age of 59 ½ years. In a previous article however, I discussed that there is a $5000 annual limit in saving for retirement in a tax deferred Roth IRA account. Because of this, serious dividend investors would likely have a small amount of their assets in tax deferred accounts.
Many investors also fear the fact that an increase in dividend tax rates would cause corporations to shift their focus from paying dividends to buying back stock. In my experience as a dividend investor, I would say that the companies that have had long histories of paying and even raising distributions to shareholders will continue to do so. After all, companies like Procter & Gamble (PG) or Coca-Cola (KO) have boosted dividends for over 5 decades, while paying dividends for at least one century. The past five decades have been characterized by top marginal taxes on dividends which have been much higher than the proposed tax increase. In addition, a large portion of the population does have balances in their 401 (k) retirement accounts however. These accounts are mostly invested in mutual funds, who these days own large stakes in America’s largest publicly traded companies. As a result, I do not expect many dividend growth companies to change their payment cultures overnight.
Another reason why investors should not be worried, at least not yet, is the fact that the proposed tax increase in the 2012 budget is not set in stone. The preferential treatment on dividends might still get extended for a few years. Back in 2010, the preferential treatment on dividends was extended for two years. As with most other important decisions, I expect that the outcome related to uncertainties behind dividend tax rates will be resolved in the last minute.
In addition, I do not pay much attention to taxes, because there is always a tradeoff involved. I could put all my money in tax deferred accounts, but I would have to wait until I am in my late 50s before I can withdraw income without paying any penalties. Placing my investments in taxable accounts exposes me to paying taxes on dividend and realized capital gains, but allows me the flexibility to withdraw and spend money as I please. I choose to select the best dividend stocks that will grow earnings, dividends and hopefully stock prices while I hold on to them. It is much easier to rely on dividend payments, rather than to worry about stock prices, in order to sell shares for income in retirement. Dividend payments are much less volatile in comparison with capital gains, and always represent a positive return on investment. Capital gains on the other hand are not income, until they have been realized by selling stock.
Taxes are just one aspect of the investment decision making matrix. In order to make the best decision, investors need to determine whether the company they are evaluating is attractively valued, has long term upside potential, and only after that should they worry about potential bite from dividend taxes. Worrying about taxes on dividend income, is akin to purchasing dividend paying stocks only based on yield. Investors will be much better off just starting their accumulation process in taxable or tax-deferred accounts, rather than waiting until all the uncertainties are over. After all, investing is all about embracing various risks, and having the plan to address or mitigate them through your retirement strategy.
Full Disclosure: Long PG and KO
Relevant Articles:
- Benchmarking Dividend income
- Best Dividends Stocks for the Long Run
- Dividend Investing is not a black or white process
- Dividend Investing Misconceptions
This might sound like heresy for many investors, who are anxiously hearing about the expiration of the current preferential treatment of dividends in 2012. This could mean that dividends will be taxed as ordinary income, the same way that bonds are taxed today. This could bring a potential 43.60% tax rate on the highest income brackets, if taxes are increased as well.
First, few people are actually making a lot with dividends. Research I have uncovered shows that the average investor in their 60’s does not make more than a few thousand dollars in annual dividend income. For a retired individual, even if dividends are taxed as ordinary income, they would likely not end up paying that much more in taxes. Of course, if you are a highly compensated lawyer or a company executive officer, chances are that you will be paying that high tax rate. Although no one likes paying taxes, there are few options that investors can choose.
One such option is to put all your money in tax-deferred accounts like IRA’s or ROTH IRA’s. Most investors typically have a large portion of their net worth tied up in IRA’s or 401 (k) plans. Unfortunately, 401 (k) plans do not offer investors much flexibility in investment options beyond the traditional mutual funds. Utilizing Roth IRA’s would essentially shield investors from paying any taxes during their accumulation period, as well as during their distribution period, as long as they take earnings out after the age of 59 ½ years. In a previous article however, I discussed that there is a $5000 annual limit in saving for retirement in a tax deferred Roth IRA account. Because of this, serious dividend investors would likely have a small amount of their assets in tax deferred accounts.
Many investors also fear the fact that an increase in dividend tax rates would cause corporations to shift their focus from paying dividends to buying back stock. In my experience as a dividend investor, I would say that the companies that have had long histories of paying and even raising distributions to shareholders will continue to do so. After all, companies like Procter & Gamble (PG) or Coca-Cola (KO) have boosted dividends for over 5 decades, while paying dividends for at least one century. The past five decades have been characterized by top marginal taxes on dividends which have been much higher than the proposed tax increase. In addition, a large portion of the population does have balances in their 401 (k) retirement accounts however. These accounts are mostly invested in mutual funds, who these days own large stakes in America’s largest publicly traded companies. As a result, I do not expect many dividend growth companies to change their payment cultures overnight.
Another reason why investors should not be worried, at least not yet, is the fact that the proposed tax increase in the 2012 budget is not set in stone. The preferential treatment on dividends might still get extended for a few years. Back in 2010, the preferential treatment on dividends was extended for two years. As with most other important decisions, I expect that the outcome related to uncertainties behind dividend tax rates will be resolved in the last minute.
In addition, I do not pay much attention to taxes, because there is always a tradeoff involved. I could put all my money in tax deferred accounts, but I would have to wait until I am in my late 50s before I can withdraw income without paying any penalties. Placing my investments in taxable accounts exposes me to paying taxes on dividend and realized capital gains, but allows me the flexibility to withdraw and spend money as I please. I choose to select the best dividend stocks that will grow earnings, dividends and hopefully stock prices while I hold on to them. It is much easier to rely on dividend payments, rather than to worry about stock prices, in order to sell shares for income in retirement. Dividend payments are much less volatile in comparison with capital gains, and always represent a positive return on investment. Capital gains on the other hand are not income, until they have been realized by selling stock.
Taxes are just one aspect of the investment decision making matrix. In order to make the best decision, investors need to determine whether the company they are evaluating is attractively valued, has long term upside potential, and only after that should they worry about potential bite from dividend taxes. Worrying about taxes on dividend income, is akin to purchasing dividend paying stocks only based on yield. Investors will be much better off just starting their accumulation process in taxable or tax-deferred accounts, rather than waiting until all the uncertainties are over. After all, investing is all about embracing various risks, and having the plan to address or mitigate them through your retirement strategy.
Full Disclosure: Long PG and KO
Relevant Articles:
- Benchmarking Dividend income
- Best Dividends Stocks for the Long Run
- Dividend Investing is not a black or white process
- Dividend Investing Misconceptions
Monday, April 23, 2012
Fourteen Companies providing reliable distribution hikes to shareholders
My retirement strategy entails purchasing quality dividend growth stocks, which consistently raise distributions. It is very reassuring when I see that the companies I have purchased in my dividend portfolio increase dividends, and thus providing me with solid evidence that my research has been correct. Of the list of consistent dividend raisers from the past week, there were four in which I owned a position. On average, these stocks have delivered a 6.90% increase in distributions to me over the past year.
The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company raised quarterly dividends by 7% to 56.20 cents/share. This dividend king has raised dividends for 56 years in a row. Yield: 3.40% (analysis)
Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals in the United States, Canada, and Gulf of Mexico. This master limited partnership raised quarterly distributions to 62.75 cents/unit, which represented a 5% increase over the same rate this time in 2011. Enterprise Products Partners has raised distributions for 15 years in a row. Yield: 5% (analysis)
Kinder Morgan Energy Partners, L.P. (KMP) operates as a pipeline transportation and energy storage company in North America. This MLP raised quarterly distributions to $1.20/unit, which represented a 5.30% increase over the same rate this time in 2011. Kinder Morgan Energy Partners has raised distributions for 15 years in a row. Yield: 5.70% (analysis)
ONEOK Partners, L.P. (OKS) engages in the gathering, processing, storage, and transportation of natural gas in the United States. This MLP raised quarterly distributions to 63.50 cent/unit, which represented a 10.40% increase over the same rate this time in 2011. ONEOK Partners has raised distributions for 7 years in a row. Yield: 4.60%
Western Gas Partners, LP (WES) , together with its subsidiaries, engages in the acquisition, ownership, development, and operation of midstream energy assets in east and west Texas, the Rocky Mountains, and the Mid-Continent. This MLP raised quarterly distributions to 46 cent/unit, which represented a 17.90% increase over the same rate this time in 2011. Western Gas Partners has raised distributions for 5 years in a row. Yield: 4%
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 MLP raised quarterly distributions to 48 cent/unit, which represented a 4.30% increase over the same rate this time in 2011. Spectra Energy Partners has raised distributions for 5 years in a row. Yield: 6.10%
Crestwood Midstream Partners LP (CMLP) engages in gathering, compressing, treating, processing, and transporting natural gas primarily on the Barnett Shale formation of the Fort Worth Basin in north Texas. This MLP raised quarterly distributions to 50 cent/unit, which represented a 13.60% increase over the same rate this time in 2011. Crestwood Midstream Partners has raised distributions for 6 years in a row. Yield: 7.40%
Omega Healthcare Investors, Inc. (OHI) operates as a real estate investment trust (REIT) in the United States. The company raised quarterly distributions to 42 cents/share, which represented a 10.50% increase over the same rate this time in 2011. This dividend achiever has raised distributions for 10 years in a row. Yield: 8%
The Southern Company (SO) operates as an electric utility company. It is involved in the generation, transmission, and distribution of electricity through coal, nuclear, oil and gas, and hydro resources. The company raised quarterly dividends by 3.70% to 49 cents/share. This dividend achiever has raised dividends for 11 years in a row. Yield: 4.30%
PPG Industries, Inc. (PPG) manufactures and supplies protective and decorative coatings. The company raised quarterly dividends by 3.50% to 59 cents/share. This dividend aristocrat has raised dividends for 41years in a row. Yield: 2.30% (analysis)
Sonoco Products Company (SON) provides industrial and consumer packaging products, and packaging services worldwide. The company raised quarterly dividends by 3.30% to 30 cents/share. This dividend champion has raised dividends for 29 years in a row. Yield: 3.70%
People’s United Financial, Inc. (PBCT) operates as the bank holding company for People’s United Bank that provides commercial banking, retail and business banking, and wealth management services to individual, corporate, and municipal customers. The company raised quarterly dividends by 1.60% to 16 cents/share. This dividend achiever has raised dividends for 20 years in a row. Yield: 5.20%
The Travelers Companies, Inc. (TRV), through its subsidiaries, provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States. The company raised quarterly dividends by 12.20% to 46 cents/share. The Travelers Companies has raised dividends for 8 years in a row. Yield: 2.90%
Somerset Hills Bancorp (SOMH) operates as the holding company for Somerset Hills Bank, which provides commercial banking products and services primarily in Somerset, Morris, and Union Counties of New Jersey. The company raised quarterly dividends by 14.10% to 8 cents/share. Somerset Hills Bancorp has raised dividends for 8 years in a row. Yield: 3.90%
Full Disclosure: Long PG, EPD, KMR, OKS
Relevant Articles:
- My Dividend Retirement Plan
- A dividend portfolio for the long-term
- Eleven Dividend Kings, Raising dividends for 50+ years
- MLP’s deliver consistent distribution increases
The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. The company raised quarterly dividends by 7% to 56.20 cents/share. This dividend king has raised dividends for 56 years in a row. Yield: 3.40% (analysis)
Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals in the United States, Canada, and Gulf of Mexico. This master limited partnership raised quarterly distributions to 62.75 cents/unit, which represented a 5% increase over the same rate this time in 2011. Enterprise Products Partners has raised distributions for 15 years in a row. Yield: 5% (analysis)
Kinder Morgan Energy Partners, L.P. (KMP) operates as a pipeline transportation and energy storage company in North America. This MLP raised quarterly distributions to $1.20/unit, which represented a 5.30% increase over the same rate this time in 2011. Kinder Morgan Energy Partners has raised distributions for 15 years in a row. Yield: 5.70% (analysis)
ONEOK Partners, L.P. (OKS) engages in the gathering, processing, storage, and transportation of natural gas in the United States. This MLP raised quarterly distributions to 63.50 cent/unit, which represented a 10.40% increase over the same rate this time in 2011. ONEOK Partners has raised distributions for 7 years in a row. Yield: 4.60%
Western Gas Partners, LP (WES) , together with its subsidiaries, engages in the acquisition, ownership, development, and operation of midstream energy assets in east and west Texas, the Rocky Mountains, and the Mid-Continent. This MLP raised quarterly distributions to 46 cent/unit, which represented a 17.90% increase over the same rate this time in 2011. Western Gas Partners has raised distributions for 5 years in a row. Yield: 4%
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 MLP raised quarterly distributions to 48 cent/unit, which represented a 4.30% increase over the same rate this time in 2011. Spectra Energy Partners has raised distributions for 5 years in a row. Yield: 6.10%
Crestwood Midstream Partners LP (CMLP) engages in gathering, compressing, treating, processing, and transporting natural gas primarily on the Barnett Shale formation of the Fort Worth Basin in north Texas. This MLP raised quarterly distributions to 50 cent/unit, which represented a 13.60% increase over the same rate this time in 2011. Crestwood Midstream Partners has raised distributions for 6 years in a row. Yield: 7.40%
Omega Healthcare Investors, Inc. (OHI) operates as a real estate investment trust (REIT) in the United States. The company raised quarterly distributions to 42 cents/share, which represented a 10.50% increase over the same rate this time in 2011. This dividend achiever has raised distributions for 10 years in a row. Yield: 8%
The Southern Company (SO) operates as an electric utility company. It is involved in the generation, transmission, and distribution of electricity through coal, nuclear, oil and gas, and hydro resources. The company raised quarterly dividends by 3.70% to 49 cents/share. This dividend achiever has raised dividends for 11 years in a row. Yield: 4.30%
PPG Industries, Inc. (PPG) manufactures and supplies protective and decorative coatings. The company raised quarterly dividends by 3.50% to 59 cents/share. This dividend aristocrat has raised dividends for 41years in a row. Yield: 2.30% (analysis)
Sonoco Products Company (SON) provides industrial and consumer packaging products, and packaging services worldwide. The company raised quarterly dividends by 3.30% to 30 cents/share. This dividend champion has raised dividends for 29 years in a row. Yield: 3.70%
People’s United Financial, Inc. (PBCT) operates as the bank holding company for People’s United Bank that provides commercial banking, retail and business banking, and wealth management services to individual, corporate, and municipal customers. The company raised quarterly dividends by 1.60% to 16 cents/share. This dividend achiever has raised dividends for 20 years in a row. Yield: 5.20%
The Travelers Companies, Inc. (TRV), through its subsidiaries, provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States. The company raised quarterly dividends by 12.20% to 46 cents/share. The Travelers Companies has raised dividends for 8 years in a row. Yield: 2.90%
Somerset Hills Bancorp (SOMH) operates as the holding company for Somerset Hills Bank, which provides commercial banking products and services primarily in Somerset, Morris, and Union Counties of New Jersey. The company raised quarterly dividends by 14.10% to 8 cents/share. Somerset Hills Bancorp has raised dividends for 8 years in a row. Yield: 3.90%
Full Disclosure: Long PG, EPD, KMR, OKS
Relevant Articles:
- My Dividend Retirement Plan
- A dividend portfolio for the long-term
- Eleven Dividend Kings, Raising dividends for 50+ years
- MLP’s deliver consistent distribution increases
Friday, April 20, 2012
Three Companies expecting high dividend growth and returns
Dividend growth stocks provide investors with a rising stream of passive income, which grows over time. The consistent nature of dividend increases protects the dividend income against inflation. However, many dividend growth stocks actually tend to deliver dividend growth which typically exceeds the rate of inflation. Historically, US stocks have managed to boost dividends above the rate of inflation by 2% – 3%.
There is typically a trade-off between dividend yield and dividend growth, that investors have to put up with. Generally, companies with the highest current yields tend to distribute most of their cash flows to shareholders, which leaves little room for investment in the business. This leads to low earnings growth, that trickles down into low dividend growth. Companies with low and medium sized yields however tend to disitrbute a low portion of their earnings to shareholders, with the rest reinvested in the business, thus providing fuel for future dividend increases.
Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company expects to generate 10%- 12% annual growth in earnings through its cost reduction programs, acquiring companies internationally as well as innovating in growing markets in order to position itself favorably. Phillip Morris International will be able to keep increasing dividends at the high single digit percentage points in the foreseeable future, while paying an above average yield of 3.60% today. (analysis)
ONEOK, Inc. (OKE), a diversified energy company, engages in the gathering, processing, storage, and transportation of natural gas in the United States. The company operates through three segments: ONEOK Partners, Natural Gas Distribution, and Energy Services. The company enjoys strong performance in its ONEOK Partners (OKS) segment, which has resulted in increased distributions to ONEOK from the partnership. In addition, the company has been able to generate strong cash flow from its natural gas distribution segment. ONEOK indicated in September 2011 that it expects to increase its dividend 50 percent by 2014 and affirmed a long-term dividend payout target of 60 percent to 70 percent of recurring earnings, subject to board of directors' approval. ONEOK announced today it is considering increasing its July 2012 dividend above the 4-cent-increase it provided in September 2011. Yield: 3% (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 expects its acquisition of El Paso to be completed by May 2012. This combination will lead to synergies and cost savings of approximately $350 million/year. As a result of this transaction and KMI’s normal expected annual growth, KMI still expects its dividend per share to grow at an average annual rate of around 12.5 percent through 2015 from its budgeted 2011 dividend per share of $1.16. The growth of KMI is being driven by Kinder Morgan Partners (KMP), which expects to declare cash distributions of $4.98 per unit for 2012, an 8 percent increase over the $4.61 per unit it will distribute for 2011. Yield: 3.30% (analysis)
Full Disclosure: Long PM, OKS, KMR and KMI
There is typically a trade-off between dividend yield and dividend growth, that investors have to put up with. Generally, companies with the highest current yields tend to distribute most of their cash flows to shareholders, which leaves little room for investment in the business. This leads to low earnings growth, that trickles down into low dividend growth. Companies with low and medium sized yields however tend to disitrbute a low portion of their earnings to shareholders, with the rest reinvested in the business, thus providing fuel for future dividend increases.
There are a few companies which meet both criteria, when purchased at the right times:
Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company expects to generate 10%- 12% annual growth in earnings through its cost reduction programs, acquiring companies internationally as well as innovating in growing markets in order to position itself favorably. Phillip Morris International will be able to keep increasing dividends at the high single digit percentage points in the foreseeable future, while paying an above average yield of 3.60% today. (analysis)
ONEOK, Inc. (OKE), a diversified energy company, engages in the gathering, processing, storage, and transportation of natural gas in the United States. The company operates through three segments: ONEOK Partners, Natural Gas Distribution, and Energy Services. The company enjoys strong performance in its ONEOK Partners (OKS) segment, which has resulted in increased distributions to ONEOK from the partnership. In addition, the company has been able to generate strong cash flow from its natural gas distribution segment. ONEOK indicated in September 2011 that it expects to increase its dividend 50 percent by 2014 and affirmed a long-term dividend payout target of 60 percent to 70 percent of recurring earnings, subject to board of directors' approval. ONEOK announced today it is considering increasing its July 2012 dividend above the 4-cent-increase it provided in September 2011. Yield: 3% (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 expects its acquisition of El Paso to be completed by May 2012. This combination will lead to synergies and cost savings of approximately $350 million/year. As a result of this transaction and KMI’s normal expected annual growth, KMI still expects its dividend per share to grow at an average annual rate of around 12.5 percent through 2015 from its budgeted 2011 dividend per share of $1.16. The growth of KMI is being driven by Kinder Morgan Partners (KMP), which expects to declare cash distributions of $4.98 per unit for 2012, an 8 percent increase over the $4.61 per unit it will distribute for 2011. Yield: 3.30% (analysis)
Full Disclosure: Long PM, OKS, KMR and KMI
Relevant Articles:
Subscribe to:
Posts (Atom)
