I have decided to start a new series on the best stocks for dividend investing. This series will take a look at the best yields that the market is currently serving up. I will look for the best dividend payers in every sector of the economy.
There is a stock in the energy sector that is currently rewarding investors with a 6.2% dividend yield. Investors not only get to own a part of a sector that has been on fire recently but they get a nice dividend to boot. Crude oil crossed over $105 a share yesterday and continues to maintain its momentum. You can get a part of the energy market too by owning a piece of this Texas company.
The company in question is Kinder Morgan Energy Partners (KMP).
Kinder Morgan Energy Partners is a master limited partnership so income generated will be treated as partnership income. Master limited partnerships are basically just publicly traded partnerships. The have the tax benefits of a limited partnership but are traded on public exchanges. This means that you will receive a K-1 instead of a 1099 DIV form. The income will be treated as partnership income and not dividend income.
Investors are paid through quarterly required distributions. These have to be paid for the master limited partnership to stay in existence. MLP’s typically pay some of the highest dividends around.
Kinder Morgan Energy owns all of the pipelines of Kinder Morgan Inc. The pipelines transport petroleum oil and natural gas. Kinder Morgan is the largest independent owner and operator of petroleum-product pipelines in the United States of America. Kinder Morgan operates in the following five segments
- Products Pipelines
- Natural Gas Pipelines
- CO2
- Terminals
- Trans Mountain
This stock is not a value play. Kinder Morgan trades at 38 times earnings in an industry that average 9% annual growth. It’s a pure dividend investment.
Kinder Morgan is so attractive because of its $4.52 annual dividend. The company’s stock is currently yielding 6.2% which may seem high but is actually below the 7.1% historical yield. This is not a company that you will need to hold for the short term and dump. Kinder Morgan is a long term stock holding. The company has a wide economic moat due to its vast pipelines and operates in an industry with major regulatory hurdles for new entrants. Kinder Morgan generates tremendous amounts of free cash flow.
Kinder Morgan Partners is a stock that any serious dividend investor should take a look at.
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