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High-Yield MLPs to Buy as Oil Prices Climb

The following is an excerpts from 7 High-Yield MLPs to Buy as Oil Prices Climb, originally published on Kiplinger’s.

After close of a decade of uninterrupted bull market, it’s hard to find many stocks that truly qualify as cheap today. But not everything is pricey – you can still find values if you know where to look. And oil and gas master limited partnerships (MLPs), as a sector, are a screaming buy at today’s prices.

A combination of low interest rates, a shrinking pool of available shares due to buybacks and mergers, and a general lack of investable alternatives have all conspired to create one of the most expensive markets history.

To put numbers to it, the Standard & Poor’s 500-stock index’s cyclically adjusted price-to-earnings ratio (“CAPE”), which compares a 10-year average of corporate earnings to today’s share prices, clocks in at 31. That’s late 1997 levels. Meanwhile, the S&P 500’s price-to-sales ratio recently hit 2.0, putting it on par with its levels in 2000 … at the peak of the greatest bubble in market history.

However, pipeline MLPs are looking inexpensive at the same time they’re exhibiting greater quality. After a couple difficult years in 2014 and 2015, MLPs have gotten their leverage under control and started funding their growth projects with internally generated cash flow rather than new debt.

“After several years of deleveraging and structural simplifications – which unfortunately came with distribution reductions in several cases – MLPs as an asset class are in the best financial health we’ve seen in a long time with an increased focus on per unit returns and self-funding capital expenditures,” explains John Musgrave, Co-Chief Investment Officer of Cushing Asset Management. ”And based on current price-to-DCF and EV-to-EBITDA multiples, MLPs are exceptionally cheap by the standards of the past 10 years.”

For a blue-chip MLP play, consider Enterprise Products Partners LP (EPD).

Enterprise Products is one of the oldest and best-respected MLPs you’re ever going to find. In an industry that has traditionally been run by cowboy capitalists, Enterprise has managed to stay remarkably level headed over the years and as reliable as Old Faithful.

Chase Robertson, Chairman of Houston, Texas-based RIA Robertson Wealth Management, says, “Enterprise Products Partners has been a core holding of our income portfolios for over a decade. It’s been a dependable workhorse for us, consistently raising its distribution like clockwork.”

Since going public in 1998, Enterprise has grown into one of the largest energy infrastructure companies in the world with approximately 50,000 miles of natural gas, natural gas liquids, crude oil and refined products pipelines and 260 million barrels of storage capacity.

Furthermore, Enterprise has eliminated the single biggest conflict of interest that has long plagued the MLP space: incentive distribution rights (IDRs). In a traditional IDR arrangement, the MLP’s general partner takes a disproportionate share of any distribution hikes to shareholders, which incentivizes them to bet the farm by raising distributions at an unsustainable pace. EPD and MMP eliminated IDRs years ago, which partly explains their more conservative profile.

Enterprise Products has raised its distribution every year since its 1998 IPO, and over the past decade, its annual distribution hikes have averaged just under 6%. At today’s prices, EPD shares yield 6.4%, which is exceptionally high by this MLP’s standards.

To finish reading the article, see 7 High-Yield MLPs to Buy as Oil Prices Climb.

Disclosures: Long EPD, ETE at time of writing.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Monthly Dividend Stocks to Pay the Bills

Source: GotCredit

The following is an excerpt from 7 Top Monthly Dividend Stocks and Funds to Buy, originally published on Kiplinger’s.

The mortgage is due every month. So are utility bills, car payments and the membership to the gym that many of us don’t actually use.

That’s not a major problem for many people because they get regular paychecks. But when they eventually retire, it would be nice to at least partially match income to their expenses.

Enter monthly dividend stocks. While bonds generally pay twice per year and most American stocks pay quarterly, a few select few stocks, ETFs and closed-end funds pay monthly, making them ideally suited for retirees living off their investments.

Naturally, you should be skeptical of gimmicky stocks, and you should never buy a stock simply because it pays a monthly dividend. Any investment you buy should meet your basic smell test for quality and should be attractively priced.

Thankfully, plenty of monthly dividend stocks make the cut. Today, we’re going to take a look at a diverse lot of seven monthly payers. Three are high-quality REITs, two are conservative ETFs, one is a dirt-cheap closed-end fund and one is a more speculative business development company trading at a deep discount. But all have one thing in common: They pay their dividends monthly.

EPR Properties

Certain “oddball” dividend payersdon’t have a built-in base of buyers or that institutional investors tend to avoid because they don’t fit nicely into a style box. This tends to make them perpetual value stocks.

One such quirky stock is EPR Properties (EPR), a REIT that specializes in entertainment and educational properties.

Most REITs specialize in broad categories of real estate, such as offices or apartments. EPR’s specialty is far narrower. Forty-four percent of its portfolio is invested in entertainment properties, primarily movie theaters. Another 32% is invested in recreational properties, such as TopGolf driving ranges and ski resorts. And 21% of the portfolio is invested in educational properties such as charter schools and daycare centers. It’s an eclectic mix you’re not going to find anywhere else.

EPR Properties also sports a high yield that you’re unlikely to find anywhere else without taking a lot more risk. EPR boasts a 7.3% dividend at the moment, and it has grown its payout at about 7% per year since 2010.

REITs have gotten absolutely thrashed over the past year, and EPR is no exception. Its stock has lost more than a quarter of its value in less than a year, and the selloff might not even be over yet. But at today’s prices, expect EPR to deliver solid, market-beating returns over at least the next five years.

To continue reading, see  7 Top Monthly Dividend Stocks and Funds to Buy.

Disclosures: Long EPR

 

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Oddball Dividend Stocks With Big Yields

 

Copyright Wintertwined

The following is an excerpt from 5 “Oddball” Dividend Stocks With Big Yields, originally published on Kiplinger’s.

It’s not the easiest market out there for income investors. With bond yields being depressed for so many years (and still extremely low by any historical standard) investors have scoured the globe for yield, which has pushed the yields on many traditional income investments – namely, bonds and dividend stocks – to levels far too low to be taken seriously.

Even after rising over the past several months, the yield on the 10-year Treasury is still only 2.9%, and the 30-year Treasury yields all of 3.2%. (Don’t spend that all in one place!) The utility sector, which many investors have been using as a bond substitute, yields only 3.4%. Yields on real estate investment trusts (REITs) are almost competitive at 4.4%, but only when you consider the low-yield competition.

Bond yields have been rising since September, due in part to expectations of greater economic growth and the inflation that generally comes with it. This has put pressure on all income-focused stocks. This little yield spike might not be over just yet, either – especially if inflation creeps higher this year.

Even if bond yields top out today and start to drift lower rather than higher, yields just aren’t high enough in most traditional income sectors to be worthwhile. So today, we’re going to cast the net a little wider. We’re going to take a look at five quirky dividend stocks that are a little out of the mainstream. Our goal is to secure high yields while also allowing for fast enough dividend growth to stay in front of inflation.

The GEO Group

Few companies are as quirky – or have quite the pariah status – as The GEO Group (GEO). GEO is a private operator of prisons that is organized as a real estate investment trust, or REIT.

Yes, it’s a prison REIT.

Prison overcrowding has been a problem for years. It seems that while getting tough on crime is popular with voters, paying the bill to build expensive new prisons is not.

This is about as far from a feel-good stock as you can get. It ranks alongside tobacco stocks on the scale of political incorrectness. The sheer ugliness of its business partially explains why it sports such a high dividend yield at well above 8%.

It’s also worth noting that this stock is riskier than everything else on this list. The U.S. is slowly moving in the direction of legalization of soft drugs like marijuana. While full legalization at the federal level isn’t yet on the horizon, you have to consider that a significant potential risk to GEO’s business model. Roughly half of all prisoners in federal prisons are there on drug-related convictions. At the state level, that number is about 16%.

GEO likely would survive drug legalization, as the privatization of public services is part of a bigger trend for cash-strapped governments. But it would definitely slow the REIT’s growth and it would seriously raise questions of dividend sustainability.

Furthermore, prison properties have very little resale value. You can turn an old warehouse into a trendy urban apartment building. But a prison? That’s a tougher sell.

So again, GEO is a riskier pick. But with a yield of more than 8%, you’re at least getting paid well to accept that risk.

To read the rest of the article, please see  5 “Oddball” Dividend Stocks With Big Yields,

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Dividend Achievers Massively Hiking Their Dividends

The following is an excerpt from 7 Dividend Achievers With Big Income Potential

There is an old Wall Street maxim that the safest dividend is the one that’s just been raised. Which is why if you’re not familiar with Dividend Achievers, you should be.

You can always find that occasional company that continued raising its dividend right up until it cut it (Kinder Morgan in 2015). But generally speaking, it’s safe to say that a dividend stock aggressively raising its payout is a healthy company and one that is justifiably confident about its future.

Earnings per share can be aggressively manipulated, as can reported revenues. Even the cash flow statement can be suspect because it ultimately pulls most of its key data points from the income statement, which can be a work of creative fiction.

Paying a dividend requires actual cash on hand. And a dividend hike implies that management is confident that there will be a lot more cash coming down the pipeline to support a higher dividend in the quarters ahead.

But even when it comes to dividends, you have to look out for chicanery and focus on quality. That means paying the dividend out of real profits and cash flows, not debt or new share issuance. As forensic accountant John Del Vecchio, co-manager of the AdvisorShares Ranger Equity Bear ETF (HDGE), says, “Dividends are a distribution of profits; a way for a company to reward its patient shareholders. But a dividend paid from debt or equity proceeds isn’t a dividend at all, but rather a return of capital. Don’t be fooled by a company returning your own money to you while calling it a dividend.”

Today, we’re going to take a look at Dividend Achievers – companies with a history of raising their annual dividends for a minimum of 10 consecutive years – that aren’t just providing token upticks. The idea is that we’re limiting our pool to stable companies with a long history of safely delivering the goods, but that also are well-positioned for growth in the immediate future.

 

Toro Company

Toro Company (TTC), a maker of lawn irrigation systems and high-end riding lawnmowers, might not have a particularly sexy or interesting business, but the industry is a resilient one. Toro has raised its dividend every year since 2003 – the one asterisk is that it kept the quarterly payout level in 2008 amid the market meltdown, but paid more on an annual basis than it did the year prior.

At the end of 2017, Toro raised its dividend by 14%. This followed a nearly 17% dividend hike the year before. Over the past 10 years, the stock has raised its dividend at an annual clip of nearly 20%. The 1.3% current yield might not be exceptionally high, but whatever the stock lacks in yield it more than compensates with dividend growth.

In Toro, you’re getting an aggressive dividend grower backed by strong demographic trends. With the Millennials starting to nest, that high dividend growth should continue for a while.

“As Millennials move through their adult lives, they’ll hit all the familiar milestones, forming families, having children, and putting down roots,” says Rodney Johnson, co-founder of economic forecasting firm Dent Research. “The transition will add growth to our economy as they fundamentally change their spending, moving from lattes to lawn care. Nothing says ‘I’m a homeowner and I’m proud!’ quite like lawn equipment!”

To read the remainder of this article, please see  7 Dividend Achievers With Big Income Potential

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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LyondellBasell: THIS Is What Buybacks Are Supposed to Look Like

Stock buybacks get a bad reputation — and justifiably so. It seems that for most companaies, a share repurchase is little more than an expensive mop to soak up share dilution from executive stock options or other share-based compensation.

So, it’s refreshing to see a company like LyondellBasell Industries (LYB). When Lyondell announces a share buyback, they mean it. The company has reduced its share count by about 10% per year for the past three years while also raising its dividend by nearly 20% per year.

That’s a company that takes care of its shareholders.

I recently added LyondellBasel to my Dividend Growth portfolio.

Disclosures: Long LYB

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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