At the start of each new quarter, there is a group of companies that announce their next dividend payments well before the actual earnings results. I look forward to these press releases, as they are proof that my income stock portfolio is providing me with a “pay” increase every quarter.
My Dividend Hunter philosophy and investment strategies focus on building a dividend income stream. If your stocks pay stable and growing dividends, the share prices are not the focus. If dividends grow, the share prices must at some point follow.
Master limited partnerships (MLPs) are companies that provide infrastructure assets and services in the energy sector. The market often links MLP values with energy commodity prices, typically the value of crude oil. However, most MLPs have fee-based business models providing essential transport, storage, and terminal services to the full range of energy producers, processors, retailers and end users.
The best MLPs have business operations and client relationships that allow them to increase the distributions paid to investors every quarter. It is about the time in the new quarter that the dividend increase announcements start to hit my e-mail inbox. I look forward to reading about how much of a pay raise my income stocks are giving me every quarter.
We are still early in the distribution announcing season, but already there has been some strong growth numbers. Here are five companies with distributions rated at “No Risk of Distribution Cut” by MLPData.com (subscription required) and companies that investors can expect to continue their trajectories of dividend growth.
Magellan Midstream Partners, L.P. (NYSE: MMP)primarily provides refined energy products pipeline and terminal services. Magellan has now increased its distribution for 61 consecutive quarters. The new distribution is 2% higher than last quarter’s payout and up 9% compared to one year ago. MMP yields 4.95%.
Phillips 66 Partners LP (NYSE: PSXP) provides pipeline, storage and terminal services for its sponsor company, crude oil refiner Phillips 66 (NYSE: PSX). The new PSXP distribution is up 4.95% over last quarter and has been increased by 21.8% over the last year. The units yield 4.5%.
Valero Energy Partners LP (NYSE: VLP) is another refiner sponsored MLP, providing similar services to Valero Energy Corporation (NYSE: VLO). VLP just increased its dividend by 6.4% and the new rate is 24.6% higher than the rate paid a year ago. VLP yields 3.7%.
Antero Midstream Partners LP (NYSE: AM) provides natural gas gathering and water treatment services to its sponsor, Antero Resources (NYSE: AR), a natural gas exploration and production energy company. The AM distribution was just increased by 6.7% and is up 28% year-over-year. The units yield 3.7%
Tallgrass Energy Partners LP (NYSE: TEP) owns and operates both crude oil and natural gas interstate pipelines and the terminals where the oil and gas get on and off those pipelines. Since its 2013 IPO, Tallgrass Energy Partners has one of the strongest distribution growth records in the MLP space. This quarter the payout was increased 10.8% over the previous quarter. The distribution is up 22.5% over the last year. TEP yields 7.2%.
These growing distribution MLPs can be great buys when the market is slow to price in new distribution increases. Over the last few months, MLP values have been tracking down with crude oil. Yet the numbers above show that revenues and cash flow continue to grow. These MLPs report tax information on IRS Schedules K-1. These tax forms add some work at tax filing time and generally make these investments a poor fit for IRA and other tax advantaged accounts. I show my Dividend Hunter subscribers some comparable 1099 reporting alternative energy infrastructure investments that have great distribution growth and income potential.
Turning your retirement savings into a consistent stream of income is no easy task. You might spend hours researching what stocks to buy, only to end up with three seemingly attractive stocks like the three above.
There are thousands of stocks to choose from, but only a small percentage of that group are the right stocks for you to own. The best high-yield stocks need to have safe long-term businesses that print money every year no matter what the market does. Those are the only companies that can pay consistent dividends.
That’s a tall task for most companies, and unless you have a degree in finance or worked on Wall Street, picking the best companies to own, out of all of the other ones, is an extremely difficult task.