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5 Dividend Stocks Best Avoided

I’m a big believer in dividend stocks. In fact, it’s rare that I buy a stock that doesn’t pay a dividend. Nothing does a better job of keeping management honest than the responsibility of paying shareholders a regular dividend.

But that said, no all dividend stocks are created equal. The “perfect” dividend stocks are ones that pay a competitive current yield but also have a good track record of raising the dividend every year. A high-yielding stock that doesn’t raise its dividend on a regular basis is essentially a risky bond with a payout that can be cut at management’s whim.Sure, you can fudge your numbers to make your earning per share number every quarter. But cold, hard cash doesn’t lie. You either have it to pay out … or you don’t.

You also need to see growing revenues and earnings. Without more money coming in, it’s hard for a company to send more in dividends outto shareholders.

And finally, we should always be a little wary of dividend stocks with extremely high yields. Once in a while, you can find a real gem with a fat yield due to a temporary mispricing. But more often than not, when you see an exceptionally high yield, the market is essentially telling you that the dividend is likely to get cut.

So with that said, let’s take a look at five dividend stocks you’re better off avoiding. All might be alluring temptresses, but they will potentially lead you on the path of income destruction.

Vale SA (VALE)

Dividend Yield: 9.2%

I’ll start with Brazilian miner Vale SA (VALE). Vale today is one of the highest-yielding stocks you can find with a dividend yield of 9.2%. It’s also a stock whose dividend is almost certain to be cut. Although the board of directors still has to approve it, management proposed slashing the dividend by half in late September.

I have nothing against Vale … or against mining stocks in general. Under the right conditions, miners can be wildly profitable trades. But they areterrible dividend stocks.

Think about it. If you’re buying dividend stocks, chances are good that you’re doing so because you need current income. You certainly wouldn’t complain if you had capital gains. But capital gains are a secondary priority.

And if it’s income you need, stability is of the utmost importance. Your expenses rarely fall, so it’s critical that your income not fall either.

Well … Vale’s business is about as far from stable as you can get. Miners have absolutely no control over the prices they get for the metals they dig out of the ground. They are completely at the whim of the market. Yet they also have very high fixed costs and, often, a unionized workforce with an ax to grind.

Vale’s stock price is down about 75% from its highs of two years ago and down about 90% from its pre-2008-crisis highs. Could VALE rally from here? Sure, particularly if Brazil’s macro situation stabilizes.

But that makes it a potential trade — not a suitable dividend stock.

Reynolds American (RAI)

Dividend Yield: 3.1%

If you’ve read my work for any time, you might be a little surprised to see Reynolds American (RAI) on a list of stocks to avoid. For years, I was a major proponent of vice investing and particularly of tobacco stocks.

But my love affair with Big Tobacco was directly the result of it being perpetually underpriced. Because of the social stigma and regulatory risk, tobacco stocks were the eternal value stocks, high-yielding dividend dynamos that offered market beating returns.

Well, things have changed. Investors have become so starved for income, they’ve actually bid up the prices of tobacco stocks to a substantial premium over the broader market. Reynolds American currently trades for 19 times next year’s expected earnings. The S&P 500 trades for closer to 16 times next year’s earnings.

Remember, tobacco is an industry in terminal decline. The number of Americans that smokes declinesevery single year. Teenagers today are more likely to have used illegal drugs in the past six months than to have smoked a cigarette. There is absolutely no justifiable reason for a Big Tobacco company to trade at a premium to the broader market.

Right now, Reynolds American sports a dividend yield of 3.1%. Sure, that’s higher than the market’s dividend yield of about 2%. But for crying out loud, shares of the resurgent Microsoft (MSFT) yield 3.3%, and which would you rather own?

Hey, there is a price at which any stock gets interesting. If Reynolds yielded a good 6%-7%, I’d be all over it. But a 3.1% yield is just not higher enough to justify buying Reynolds. This is a dividend stock best avoided.


Dividend Yield: 3.7%

It takes a certain amount of chutzpah to put IBM (IBM) on a “stocks to avoid” list. It is, after all, one of the favorite stocks of the Sage of Omaha himself, Warren Buffett. And if Buffett likes it, it must be fantastic, right?


I have absolute and total respect for Mr. Buffett. He’s a better investor than I will ever be, and I am comfortable admitting that. But he is also human and very fallible. Berkshire Hathaway (BRK.A) itself was a disastrous investment for Buffett. He admitted as much in an interview a few years ago in which he called Berkshire the single worst investment of his career. By Buffett’s own estimation, he’d be twice as rich as he is today had he never bought a single share of Berkshire Hathaway.

This brings us back to IBM. When Buffett first bought it, he was attracted to its long-term service model and its penchant for returning cash to investors via share buybacks.

But there are some big problems here. To start, IBM’s model is not as stable as it appeared a few years ago. Out of nowhere, Microsoft, Google (GOOGL) and Amazon (AMZN) have turned IBM’s business upside down with cheaper and more flexible cloud options. And the billions spent on share repurchases may go down in history as one of the worst allocations of capital in history. IBM stock is down by a third from its 2013 highs, meaning that the roughly 169 million shares repurchased since 2012 were purchased at prices well above today’s. That’s total destruction of shareholder value.

Meanwhile, IBM’s sales continue to fall. Revenues are down 17% since the end of 2012.

At current prices, IBM sports a dividend yield of 3.6% Don’t fall for it. There are better opportunities out there.

Verizon (VZ)

Dividend Yield: 5.3%

I would also recommend you avoid Verizon (VZ). Yes, it has a fantastic current yield of 5.1%. But dividend growth has been almost nonexistent for years. Over the past five years, Verizon has managed dividend growth of only 2.9% per year.

Yes, that’s beating inflation. I’ll give them that. But it’s not beating it by much.

And I wouldn’t expect much more in the way of dividend growth going forward. Verizon already pays out about 92% of its profits in dividends. So for dividend growth to improve, profit growth needs to step it up a notch.

But just how likely is that? Verizon’s primary business lines — mobile telephony and paid TV — are both mature businesses with saturated markets. Not only does every American over the age of 5 already have a mobile phone, but most have already upgraded to smartphones with data plans. And cell service is quickly becoming commoditized as cheaper rivals like T-Mobile (TMUS) undercut the larger players on price.

And cable TV appears to be in the early stages of long-term decline or, at the very least, a major shakeup. Cable bills have outpaced inflation for years, prompting many Americans – and particularly young Americans – to “cut the cord” and eschew cable service for cheaper internet options.

Verizon isn’t going out of business anytime soon. But it’s a slow-growth dinosaur with businesses under constant attack from competitors. Verizon is best avoided.

Wynn Resorts (WYNN)

Dividend Yield: 3.4%

And finally we get to hotel and casino operator Wynn Resorts (WYNN). It’s hard to think of too many sectors less suitable for a stable dividend portfolio than gaming. While many vice industries are recession resistant (people don’t stop drinking and smoking when the economy gets bad), gaming is highly dependent on tourism. And tourism, of course, is very economically sensitive. When the shekels are tight, you avoid taking that weekend trip to Las Vegas.

Wynn’s problems are compounded by the fact that it has major exposure to China’s gaming hub Macau. This would have been seen as a major strength just a few short years ago. But with the Chinese economy slowing and with the government cracking down on conspicuous consumption, exposure to Chinese gamblers is a major risk. No wonder casino stocks including WYNN jumped Friday when China said it might move to support the gaming hub.

Not surprisingly, Wynn’s stock price is down about 75% from its 2014 high. Wynn, perhaps not surprisingly, also had to cut its regular dividend recently, slashing it by two-thirds.

At current prices, the bad news from a slowing China might be fully priced in. But Wynn’s cash flows are still far too volatile for this stock to be a good dividend candidate.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog. 

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Prospect Capital: Get Ready for a Strong Finish to 2015

It might sound somewhat defeatist, but in a year like 2015, I’m just happy that my entry in the Best Stocks contest is almost in the black. It’s not that I don’t expect Prospect Capital (PSEC) to deliver solid returns. In fact, I expect it to deliver returns of 50% or more over the next 12 months. It’s just that 2015 has been one of those years when cheap value stocks have a way of getting cheaper.

With a little over one quarter to go, let’s revisit Prospect Capital and why I still believe that winning the contest this year is a very real possibility.

I’ll start with valuation. With the single exception of the 2008 meltdown, Prospect Capital is the cheapest it’s ever been based on the price/book ratio.


Prospect trades for just 77% of book value. Under normal conditions, you would expect Prospect to trade at a slight premium to book value. After all, management expertise and access to cheap capital are worth something. At current prices, the market is implicitly saying that book value is either overstated by 23% or that it expects management to destroy a lot of value in the months to come.

Now, I routinely criticize the price/book ratio as a value metric for most common stocks. Given the distorting effects of depreciation and general price inflation, book value is a meaningless metric for most mainstream common stocks. But in the case of business development companies like Prospect Capital, the book value is assessed every quarter by professional valuation experts.

Could their estimates be overstated? Sure. There is always room for interpretation, and Prospect has routinely been criticized for being a little too aggressive on their portfolio valuations relative to their peers. Let’s assume the worse and say that the portfolio is overstated by a couple percentage points. Given that the stock trades for just 77 cents on the dollar, I’d say we have a nice margin of safety.

I expect Prospect to be trading back above book value soon. But simply returning to book value would mean a move of 32%.

And then there’s the dividend. At current prices, Prospect Capital yields about 13% in dividends. Adding in four quarters’ worth of dividends would get us to a total return of about 45% in a year. And if maybe – just maybe – Prospect actually returns to its normal state of trading at a slight premium to book, we could see total returns of 50%.

But that’s not where the story ends. While I like to say that a cheap stock is its own catalyst, a cheap stock can stay cheap for a long time absent some change in the status quo.

Well, we have that change today. Finally bowing to shareholder pressure, Prospect is repurchasing its shares on the open market. In a press release last month, management wrote: “On July 28, 2015, we began repurchasing our shares of common stock as they were trading at a significant discount to NAV. Since that time, we have repurchased 4,158,750 shares of common stock at an average price of $7.22 per share. Repurchases total more than $30 million to date.”

And they haven’t stopped there. In a just-released filing, management wrote: “During the period from September 4, 2015 through September 21, 2015…we repurchased 150,000 shares of our common stock at an average price of $7.89 per share.” All I can say is, it’s about time.

As big of news as the share buyback is, Prospect is not alone in scooping up its shares. The management team itself has been aggressively buying. Year to date, four company insiders have single handedly bought 520,060 shares worth $3.9 million. I should emphasize that these are not executive stock options. The management team is whipping out their checkbooks and using their personal funds to snap up shares.

As I write this, the front runner in the Best Stocks contest, Google (GOOGL) is leading the pack with a 19% year-to-date return while Prospect Capital is down 2%. It might seem like a bit of a stretch for Prospect to come back from that kind of deficit.

But if 2015 has taught us anything, it is to expect the unexpected. And we still have a quarter to go…

Disclosures: Long PSEC

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog. 

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Why You Should Finally Trust GE’s Dividend Again

Once bitten, twice shy. That’s the attitude that investors tend to take with companies that slash or eliminate their dividends, and with good reason. If you are buying a stock with the intention of using the dividend to pay your living expenses, a dividend cut can take a wrecking ball to your retirement plans.

So it is that income investors fell out of love with iconic American blue chip General Electric (GE). During the pits of the financial crisis, with the venerable old company had to go begging to Warren Buffett for cash, GE cut its quarterly dividend from $0.31 to just $0.10 in early 2009.

Now, I certainly understand why GE did it. When you’re in bad enough financial shape to justify paying Mr. Buffett a 10% perpetual preferred-stock dividend, it makes prudent business sense to cut the common dividend. But income investors have long memories, and many are going to find it hard to trust General Electric with their retirement again.

But now that more than six years have passed since GE took a machete to its payout, I can say that it’s finally safe to trust GE’s dividend again.

Let’s dig into the details. At a current dividend yield of 3.7%, GE is one of the highest-yielding stocks in America outside of “traditional” income sectors like utilities, telecom, or tobacco. The GE dividend, at $0.23 per share, is still well below its old pre-crisis high of $0.31. But to GE’s credit, the company has raised its dividend by 130% since 2009. So GE has clearly made it a priority to reward its long-suffering shareholders with solid dividend hikes.

Over the past five years, GE has raised its dividend at an 11% compounded annual clip. And there is every reason to believe the dividend is safe for the foreseeable future. General Electric’s dividend payout ratio, at just 45%, is near the bottom end of its range of the past five years.


But the real reason to have a little faith in GE’s dividend is that this is a very different company than the one that slashed it back in 2009. Pre-crisis, GE had essentially morphed into an enormous Wall Street bank that also happens to run an industrial business on the side. In fact, the U.S. regulators deemed it a “systemically important financial institution” due to the size and scope of GE Capital’s operations. As recently as two years ago, GE Capital, as a standalone institution, would have been the seventh-largest bank in America.

All of that changed earlier this year. Back in April, GE made the decision to essentially dump GE Capital as a way of getting out from under the regulators’ thumb and finally putting the legacy of the 2008 meltdown behind it. This is a big deal, as GE Capital has long been the biggest driver of GE’s profit… as well as its biggest source of risk. It was GE Capital’s shoddy investments during the housing boom and bust that nearly buried the company.

Yet getting rid of it has been hard. GE Capital accounted for 30 percent of GE’s annual revenue over the past four years but fully 51 percent of its after-tax income. GE has been trying to shrink GE Capital for years and replace the lost revenues with growth in its industrial business lines, but the reorganization hasn’t been particularly easy. Corporate-wide revenues are still down by nearly a quarter from their pre-crisis highs, and gross margins are down about 40%. But as it has become a slimmer company, GE has also managed to trim back its risk profile. Its long-term debt outstanding has shrunk from $322 million in 2008 to just $185 million today.

All in all, the post-GE-Capital General Electric will be a far less risky, albeit less profitable, industrial conglomerate. It’s not all wine and roses for GE going forward, and there will always be risks with which to contend. Just earlier this year, GE had to slash spending and headcount in its energy unit as the plummeting price of crude oil has reduced the need for new equipment.

But overall, with GE Capital on the way out, GE is now pretty well shorn of the sort of “black swan” risk that could bury the company. That might make it a little less interesting as a growth story. And in fact, I’m somewhat on the fence myself as to whether GE is attractive at current prices. But if nothing else, the shift away from GE Capital makes it a lot more attractive as a safe dividend stock.

Disclosures: None

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Put Ford On Your Post-Correction Buy List

The market’s in correction mode right now, so it’s not a fun time to be buying much of anything. But these are precisely the times you need to be putting your buy list together. While the overall market is still expensive and may have further to fall, there are some outstanding bargains out there. For those with an iron gut, this is the time to start nibbling.

Let’s take a look at Ford Motor Company (F). Ford has taken a nose dive in 2015 and is now down about 23% from its 52-week high. China woes, Fed angst and volatility in general have all conspired to depress the Ford’s stock price. But looking past the headlines, there is a lot to like about Ford. Let’s take a look.

Ford Stock is Cheap

We’ll start with valuation. No matter how you slice it, Ford is cheap at today’s prices. Ford changes hands at just 7 times expected 2016 earnings, and it sports a 10-year cyclically-adjusted price earnings ratio (CAPE) of just 6.5. If you use a 5-year CAPE, which would only include the healthier post-crisis years, you get an even cheaper 6.4

Stripping out the accounting gimmicks that can manipulate earnings, Ford trades at 0.38 times sales.

And let’s not forget that that sales have been depressed for years. Auto sales fell off of a cliff during the 2008 meltdown and have only recently returned to pre-crisis levels. If you can believe it, annual American auto sales are still below the levels of the early 2000s… despite the fact that the American population has grown by more than 30 million people since then.


Ford’s dividend yield is also one of the highest among major American companies at 4.3%.As seeing as how Ford only pays out about 60% of its (depressed) profits in dividends, I would say the dividend is safe for the foreseeable future.

If you owned Ford during the mid-2000s, this might be something of a sore spot. Ford cut its dividend in 2006 and eliminated it altogether a quarter later, as the company worked through some very difficult times. But since reinstating its quarterly dividend in 2012 at $0.05, Ford has tripled it to $0.15. I expect more dividend hikes to come.

I understand that the American auto industry has been facing major headwinds for decades. Foreign competition is relentless, and American automakers have the added difficultly of struggling to compete with a punishingly strong dollar. Plus, better public transit and the rise of Uber has made a car a lot less necessary in major urban areas. And capping it off, Millennials as a generation are just flat-out less interested in driving than previous generations.

I get all of that. But the average age of American cars still on the road just hit an all-time record this year at 11.5 years. That’s not saying that the average life of a car before getting scrapped is 11.5 years. That the average age of cars currently in use. That means that a significant portion of the American auto fleet is much older than that.

Hey, cars are built better today than they were 20 years ago and you can drive them for longer. Sure. But at some point, they really do have to be replaced. Americans have avoiding making car purchases for years due to the sluggish economy and lack of wage growth. That trend won’t last forever. Eventually, the wheels fall off.

I’m not currently long Ford. Earlier this year, I opted to buy competitor General Motors (GM) for essentially the same reasons. General Motors’ valuation is in line with Ford’s, though General Motors has the benefit of having a slightly cleaner slate after its bankruptcy swept away some of its legacy debts.

Are either of these stocks something I would want to hold for the long term? Absolutely not. The auto industry is extremely cyclical and one of the few remaining large industries still subject to extortion from labor unions. These are not stocks I would want to own for the long haul. But with a time horizon of 1-2 years, I expect both to post very respectable returns.


Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog. 

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6 Small Caps to Fund Your Retirement

The words “small cap” and “retirement portfolio” aren’t often heard in the same sentence. Stocks with smaller market capitalizations can be fantastic long-term growth investments. After all, most mega-cap stocks started out as small-cap stocks.

Plus, small caps (along with value stocks) have been proven to outperform the market over time, according to Fama and French. So it makes all the sense in the world to keep small caps on your radar as an investor.

But small caps generally fail my basic tests of suitability for a retirement portfolio. As I wrote in my critique of Warren Buffett’s Berkshire Hathway (BRK.A), a stock to be held in a long-term retirement portfolio should have a highly predictable business model, should be “technology proof” and should pay steadily rising dividend. Most small-cap stocks will fail one — or often all — of these criteria.

But there are definitely some small-cap stocks out there that are completely appropriate for a retirement portfolio, and I’m going to offer up six of them today. With any luck, none of them will be small caps forever. Their steady growth will eventually land them in mid-cap or even large-cap territory.

StoneMor Partners (STON)

I’ll start with StoneMor Partners (STON). This is a stock that doesn’t make it onto too many investors’ radar screens. To start, it’s a publicly traded cemetery. That’s about the least sexy business you can run. Secondly, because it’s a small cap with a market cap of just $850 million, not too many analysts cover it. And compounding things further, it’s organized as an MLP, making it problematic to own in an IRA account.

But perhaps worst of all, cemeteries have ridiculously complex accounting and are required to defer recognition of a good chunk of their revenues until … well, until their customer dies and gets interred.

All of these factors contribute to make StoneMor something of an outcast. But I consider StoneMor a fantastic retirement stock. Its business is predictable. Until we discover the cure for old age, it’s definitely technology proof. And it happens to pay one of the highest yields currently available on the market, at 9.5%.

And the story actually gets better. Following the recent volatility in StoneMor’s stock price, company insiders have been aggressively buying the stock.

If you’re looking for great retirement-safe small caps, StoneMor is one I’d be perfectly comfortable salting away.

Preferred Apartment Communities (APTS)

Next up is Preferred Apartment Communities (APTS), an apartment REIT with a market cap of just $220 million. With Millennials entering the workforce — yet deferring home ownership — apartments have been in a nice demographic sweet spot, and Preferred Apartment Communities has been there to reap the rewards.

APTS meets my criteria as a retirement stock. It’s business highly predictable: it owns and rents out apartment buildings. It’s also technology proof. Unless I’m missing something, a smartphone app can’t replace a roof over my head. And it definitely pays an attractive dividend. At current prices, it yields 7.2%.

And importantly, despite Preferred Apartment Communities’ short history (it went public in 2011), the REIT has consistently raised its quarterly dividend. In fact, it has done so twice in just the past year, from $0.16 to $0.175 and then to $0.18.

This certainly isn’t one of those small-cap stocks that will double your money in a year. But it looks like a steady grower that would be a nice fit in a retirement portfolio. And given its modest market cap, it would also be a price acquisition candidate.

STAG Industrial (STAG)

And while we are on the theme of REITs, my next recommendation is STAG Industrial (STAG), a young REIT with a market cap of $1.2 billion. STAG has been publicly traded since 2011.

I suggested STAG in “5 High-Yield REITs for Growth and Income,” and I would reiterate that recommendation here. STAG owns a portfolio of single-tenant industrial properties (“STAG” stands for “Single Tenant Acquisition Group”) and owns things like distribution centers and warehouses.

STAG certainly meets my criteria as a retirement stock. Its business is predictable, if perhaps a little more economically cyclical than Preferred Apartment Communities. It’s also future proof, and may actually benefit from shifting technology trends. As more commerce moves online and out of brick-and-mortar stores, there will be increasing demand for warehouses and distribution centers.

And on the dividend front, STAG is a rock star. At current prices, STAG sports a juicy dividend yield of 8%, and it pays its dividend monthly.

STAG has gotten obliterated in the recent spate of volatility. But I would view this turbulence as a fantastic opportunity. Between its current dividend yield of 8% and its expected dividend growth rate of about 7% per year, you’re looking at 15% annual returns with no change in valuation. Add in some valuation expansion, and you could be looking at returns of 20% or more per year. That will double your money in about three years. Even most small caps can’t offer you that kind of performance.

Retail Opportunities Investment Corp (ROIC)


And for good measure, let’s throw in one last small cap REIT, shopping center landlord, Retail Opportunities Investment Corp (ROIC).

Retail Opportunities is a relatively young REIT, having gone public in 2009. It’s also still very small with a market cap of just $1.6 billion.

This REIT has a simple enough business model: It buys neighborhood shopping centers, generally anchored by a “necessity-based” retailer such as a major grocery store. ROIC currently owns and operates 64 shopping centers encompassing approximately 7.6 million square feet.

It’s hard to get more predictable and technology-proof than a grocery store. Sure, online grocery shopping and delivery will probably reduce foot traffic to traditional grocery stores in the years ahead. But it’s hard to see the traditional grocery model being too badly disrupted any time soon.

Meanwhile, ROIC pays a decent dividend at 4.2%. This is one of those rare small caps that would make a fine addition to a retirement portfolio.

Blue Knight Energy Partners (BKEP)

For a small-but-promising midstream MLP, take a look at Blue Knight Energy Partners (BKEP). Blue Knight has a market cap of just $205 million, making it the smallest of the small-cap stocks covered here. So it might be a little too small for most retirement portfolios. But it’s still one of the small caps that’s worth considering.

Blue Knight does indeed meet my criteria. As a midstream pipeline MLP, Blue Knight operates in a predictable business. Yes, the prices of oil and gas fluctuate wildly. That fact has never been more apparent than today. Yet midstream pipelines are mostly immune to falling energy prices, and Blue Knight has continued to grow its business despite the energy rout.

Blue Knight may not quite be “technology proof,” as I suppose someday we may no longer need fossil fuels. But I can credibly say that it is technology proof for at least the next decade and probably far longer.

And finally, Blue Knight pays a high and growing distribution. At current prices, Blue Knight yields 9.1%, and it raised its dividend by 7.5% last quarter. Not bad at all.

Barron’s recently wrote that there was a “big disconnect” between Blue Knight’s current stock price and it prospects. I would agree completely.

Teekay Corporation (TK)

With a market cap of $2.6 billion, Teekay Corporation (TK) is pushing the limits of what most investors might consider a small-cap stock. But it is certainly small enough to be off the radar of many large investors. And their loss is our gain.

Teekay is a quirky little company. It’s considered a midstream MLP (or more accurately the general partner of multiple midstream MLPs), yet unlike most midstream MLPs, Teekay is not a pipeline company. Teekay is in the business of maritime oil and gas transportation, and it primarily owns tankers and offshore facilities.

Teekay is the general partner of two MLPs, Teekay Offshore Partners (TOO) and Teekay LNG Partners (TGP) and the controlling shareholder of another corporation, Teekay Tankers (TNK). I’ve been a fan of MLPs for a decade now, but I actually consider the general partners to be the better long-term investment. While the dividends or distributions might be slightly lower, the dividend growth rate tends to be much faster, as the general partner takes a disproportionate share of the income.

Teekay Corporation is currently a tanker company in its own right, but it is transitioning into a pure-play general partner by dropping its operating assets down into its MLPs. And that can only mean one thing: A big surge in dividend growth.

Teekay raised its dividend by 70% earlier this year, and management expects annual dividend growth of 15% to 20% over the next three years. Should Teekay’s stock price keep pace with its dividend growth, this stock should double your money in about three years.

This piece first appeared on InvestorPlace. Disclosures: Long APTS, BKEP, STAG, STON, TK

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog. 

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