The case for investing in dividend stocks

Posted August 18, 2011 at 2:27 am

from Dividend Growth Investor

I am a dividend growth investor because my research has uncovered that dividend growth stocks perform very well over time. I purchase stocks in solid companies which pay dividends, and regularly increase them each year. This is the strategy I am using in order to live off dividends in retirement.

My research shows that a portfolio of carefully selected dividend stocks will provide a sufficient income stream for me to live on, without having to touch principal. The fact that the companies I purchase also grow earnings to pay growing distributions each year means that over time stock prices would go higher, thus providing some protection to my capital from inflation.

My neighbor is not a dividend investor. My neighbor purchases index funds and hopes to rely on an asset depletion strategy commonly referred to as the four percent rule.

You can read more about the original research about it here. Basically, my neighbor is relying on total returns from index funds, in order to fund their retirement. Historically, stocks have produced an annual return of 9% – 10% per year.

If one owns $1 million worth of an S&P 500 index fund, their return would be approximately $90-$100 thousand per year. Thus, selling $40,000 worth of stock each year would lead to a portfolio value of 1,050 to 1,060 million by the end of first year.

This was a good strategy for generations of do it yourself index investors. Accumulate as much in index funds as possible, and then sell off 4% of your initial portfolio value each year, while also adjusting for inflation.

The one problem that this strategy creates is that it leads to a [continue]…


 

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16 Core Dividend Stocks for your income portfolio

Posted July 11, 2011 at 2:41 am

from The Dividend Growth Investor

There are approximately 300 stocks in the world, which have managed to increase dividends for at least ten years in a row.

As a dividend growth investor I have analyzed in some detail almost all of these stocks, even though most of them will probably never meet my entry criteria.

One reason behind that is valuation. Another, more important reason is that few of these companies have sustainable competitive advantages. As a result, in my articles describing dividend growth investing I tend to focus on a narrow list of quality candidates.

The reason behind this is because there are only a handful of quality dividend growth stocks which meet the above characteristics.

These companies have a proven track record of dividend increases, fueled by earnings growth which was a direct result of having a strong brand name and a product or service which they can charge premium prices for.

Right now, I find these quality companies to be the core of my dividend portfolio. If I were starting in dividend investing today, I would certainly be accumulating these stocks first, before looking for other opportunities.

See the 16 stocks here…

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How To Start Dividend Investing With Little Money

Posted June 28, 2011 at 3:11 am

via The Passive Income Earner

One of the most challenging aspects of starting with dividend investing may be to not know how much money we need to get started. I started investing in mutual funds back in my 20′s and I was focused on building my RRSP (Registered Retirement Savings Plan) and maximizing my contributions.

That’s what you were suppose to do … Well, the reality is that the benefits of RRSP when your income is low is not all that great from a tax saving perspective.

It’s great that you start early since you will leverage the years of growth but wouldn’t it be nice to also get the benefits of compound growth with dividends? Let’s cover the options when you are young to put dividend investing in perspective.

Investing Options In Your 20′s

You just got your first job and you want to save some money or build a nest egg for early retirement :) Chances are that you don’t have thousands of dollars available for investing. Between paying for the rent, food and transportation, you’ll probably have a few hundreds of dollars available per month to possibly invest.

With such small amounts, the options are usually the following…

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How to create a high yield dividend portfolio

Posted May 20, 2011 at 3:30 am

From Dividend Growth Stocks

Every investor  wants to earn more. It is how we define “more” and how we go about earning it that defines the type of investor we are. Income investors want more income. Yield is a significant determinate of income. There are two ways to own a high yield dividend portfolio.

They are:

I. Buy The High Yield

If you want a high yield [dividend] portfolio today, the only way to get it is to buy high-yield [dividend] stocks. The problem with this approach is that companies with high-yield stocks are not run by nicer, more generous, shareholder-friendly executives. Instead, companies with high-yield stocks usually carry more risk.

This path to high-yield often ends with dividend cuts or significantly declining share prices. That leads us to option II, a better way to earn high yield for the more conservative income investor.

II. Build The High Yield

Instead of buying a current high-yield stock, investors in dividend growth stocks prefer to build their own. Granted, the current yield may never be classified as high-yield, but over time the yield-on-cost (YOC) can reach epic heights. YOC is simply Current Annual Dividend dividend by Original Cost Per Share.

YOC is not a substitute for calculating an internal rate of return (IRR). The IRR calculation takes into account both capital appreciation and the timing of cash flows (purchases, sells and dividends). YOC does illustrate the power of a growing dividend when compared to fixed rate investments suxh as bonds and CDs.

So how does YOC grow over time? Here are several real-world examples from my income portfolio:

a. Dividend Growing Faster Than The Share Price

To create a large gap between current yield and YOC all you need is a dividend growing faster than the stock price and some time to pass. This can be a very powerful combination if you are fortunate enough to purchase a low yielding stock before several significant dividend increases.

Consider Wal-Mart (WMT). In July 2007, I purchased WMT at $48.83/share at a time when its quarterly dividend was only $0.22/share. The initial yield was a lowly 1.8% ($0.22*4/48.83). Four dividend increases later, WMT is now paying a quarterly dividend of $0.37/share which gives me a respectable YOC of 3.0% ($0.37*4/48.83).

That is a 68% increase in the stock’s dividend, while its share price only grew 12.6% to around $55 for a current yield of 2.7%. If the two growth rate were to remain constant the difference between YOC and current yield will grow exponentially.

Full article…

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A Utility Stock with Triple-Digit Upside

Posted May 3, 2011 at 2:48 am

by Tim Begany

If you invest for growth, I’ll bet you hardly ever bother to check out the utilities sector. Why would you? Utilities are mainly for income, right?

It all depends on where you look. If you expand your search to other continents, you may uncover utility stocks offering attractive growth potential and juicy dividends.

I’ve found a very interesting one.

At 4.7%, its yield is just what you’d expect from a utility stock. But would you believe it has high double-digit — if not triple-digit — upside?

I know it sounds like a stretch, but it’s true. Right now, this stock has what every investor wants in an investment — the possibility of high returns, a better-than-average yield and very low volatility. The company, Huaneng Power International (NYSE: HNP), is China’s largest independent electricity producer, operating 175 power plants in 27 provinces and Singapore.

Huaneng has been rapidly increasing output for years now. The latest example: first-quarter power generation of 75.4 billion kilowatt hours (kWh), a 29% increase compared with the first quarter of last year. First-quarter sales improved 25% to 71.1 billion kWh.

The fast growth clearly has much to do with China’s economic expansion, which supported double-digit gains in electricity usage right through the global recession. Analysts say usage will keep rising and outpace China’s projected long-term economic growth of 9.5% a year through 2020.

Full article…

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5 Small Stocks that Pay Big Dividends

Posted December 23, 2010 at 4:44 pm

from The Jutia Group:

As an income investor, I occasionally feel forced to choose between growth and a hefty dividend.

Finding a high yielding stock that also has good growth potential is a rarity.

One reason for that may be that fast-growing companies often don’t pay a dividend. Instead, these companies re-invest their cash flow in the business and only begin paying a dividend when internal growth prospects diminish.

While it is generally difficult to find income and growth in the same investment, there are a handful of exceptional stocks that manage to combine both. These rare gems do exist, but the trick is knowing where to look. 

A good place to start is in the universe of small cap stocks. That is because small companies typically grow faster than big companies. They also perform better coming out of a recession. That pattern is evident in this economic recovery. The  S&P 600  Index of small cap stocks is up about 28% in 2010 after returning 25.6% in 2009. That’s more than triple this year’s 13% gain of the well-known S&P 500 Index of large companies. 

Small cap outperformance didn’t suddenly begin with the current bull market. In fact, small cap stocks have led the market for more than a decade. Since the end of 1999, small cap stocks have delivered annualized gains of 3.9%, compared with losses of 0.5% for large stocks.

A screen for small cap stocks was my starting point for finding high yielders that are still growing. I then screened this group for names with generous yields and above-average income growth.

Here are the top results from my search…

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MLPs: Strong Investment Vehicles in Uncertain Economic Times

Posted August 18, 2010 at 11:19 am

Credit Suisse Analyst Yves Siegel believes master limited partnerships (MLPs) are strong investment vehicles, particularly in uncertain economic circumstances. He explains:

I don’t think there are many other places where investors can put their dollars and get a nice return with very moderate risk,

In this exclusive interview with The Energy Report, Yves talks about the “Big Kahuna” and a handful of other well-managed MLP names with impressive yields and sector-leading growth prospects.

The Energy Report: Yves, as of July 20, 2010 the Alerian MLP Index was up 13.7% for the year, whereas the S&P 500 was down 4.5%. What factors are allowing MLPs to vastly outperform the market right now?

Yves Siegel: I think it’s pretty simple. Firstly, MLPs are viewed as good defensive investments in times of uncertainty. Secondly, MLPs provide investors with an attractive, partially tax-deferred yield. Right now, the average MLP yield is around 6.5%. Thirdly, with distributions there’s the potential income growth that could average 3% –6%. The yield plus distribution growth still provides a pretty good investment value proposition. I don’t think there are many other places where investors can put their dollars and get a nice return with very moderate risk.

TER: Is this an unprecedented time in terms of money pouring into MLPs?

YS: I’m not sure it’s unprecedented. Back in 2007, you had a lot of inflow of capital. The difference is the money attracted to the MLP space back in 2007 was what I could call “fast money.” It was more hedge fund–based than the more traditional retail investor. They were attracted to the unprecedented growth in MLP distributions. Those investors tended to have a much shorter time horizon. I think they correctly viewed MLPs as a good place to invest, but perhaps too much of a good thing is no longer a good thing.

TER: You mentioned the tax-deferred status of MLP distributions. Is Credit Suisse concerned that the combination of the US federal cash crunch and the success of MLPs in this bear market could lead to further taxes?

YS: There’s always a risk that someone in government will take a harder view of the MLPs. We don’t see that on the near-term horizon. We would say that the MLPs are building a lot of the necessary energy infrastructure in the United States and that this is creating a lot of jobs. MLPs provide a really valuable service, and I don’t think it makes a whole lot of sense to change the tax status.

TER: Kinder Morgan Energy Partners L.P. (KMP) did a $75-million equity financing in June and Energy Transfer Partners L.P. (ETP) raised about $437 million in a recent financing. In total, MLPs have raised $7.2 billion in equity financings so far this year. Is this normal, or is this amount of dilution cause for alarm?

YS: I’d be careful using the term “dilution.” The MLP business model is such that nearly all of the cash flow — after maintenance capital — is distributed to the unit holders. In most conventional businesses, you retain a portion of your cash flow to reinvest in the business. MLPs generally do not do that because of the structure. That raises the question: How do you grow if you’re distributing all your cash?

The answer: You have to rely on external capital, both equity and debt. As I said earlier, MLPs are financing the infrastructure growth in the US They’re building the pipelines, storage assets and processing assets necessary to get the new energy supplies to market. The way they finance that growth is by issuing equity and issuing debt. It’s really important to recognize that the MLP structure is very transparent. Just follow the cash.

If MLPs were not able to invest that cash productively (i.e., have a return in excess of their cost of capital), they wouldn’t be able to continue accessing external capital. That transparency is a plus. The mindset is: I have to be a good steward of capital from investors; otherwise I’m not going to be able to go back and ask them for more money. That rationale is incredibly important. As long as MLPs have good investment opportunities, you’ll see relatively high financing requirements and a lot of equity and debt being raised.

TER: Is the $7.2 billion invested so far this year a lot higher than that over the same period last year?

YS: The pace of equity offerings has quickened this year relative to 2008 and 2009 when $6.4 billion and $6.8 billion was raised respectively in each year. This is due in part to the deferral of offerings in those years due to difficult market conditions.

TER: So, this isn’t abnormal?

YS: No, it’s not.

TER: You have an outperform rating on Energy Transfer Partners. Why do you have an outperform rating on them, and what does ETP plan to do with that capital?

YS: Energy Transfer is one of the companies that we can point to as building out the US infrastructure. Specifically, Energy Transfer is involved in two ongoing multibillion-dollar projects to take shale play gas to market. They’re building a Fayetteville pipeline that services the Fayetteville Shale and they have the Tiger Pipeline to access the Haynesville Shale.

We at Credit Suisse embrace the notion that there will be many investment opportunities around developing the shale plays in the US. We like Energy Transfer because we see them being able to grow the company via building these pipelines and benefit from the incremental cash flow that the pipelines will generate. We also think the management team is very good and has a very good track record of building shareholder value. Lastly, the MLP has a very nice yield — just north of 7%.

TER: Which MLPs stand to benefit most from their shale-play investments?

YS: Well, you have Boardwalk Pipeline Partners, L.P. (BWP). They’ve spent some $5 billion on long-haul interstate pipelines accessing some shale plays, such as the Fayetteville and Barnett Shales. They also have some exposure to Haynesville. Energy Transfer has a couple of pipeline projects. Enterprise Products Partners, L.P. (EPD) has multibillion-dollar investments surrounding the Eagle Ford Shale, which is a new play folks like because not only does it have a lot of natural gas, it also has a lot of associated natural gas liquids (NGLs). EPD is very well poised to benefit from that play.

The “Big Kahuna,” Kinder Morgan, also has exposure to various shale plays, including the Haynesville play via their KinderHawk joint venture in Louisiana. They also have large pipeline assets in Texas that give them exposure to the Barnett Shale, and they’re a partner with Energy Transfer on the Fayetteville Express Pipeline. They’ve also teamed up with a small MLP called Copano Energy, L.L.C. (CPNO) to access the Eagle Ford Shale. Those are just a few of the MLPs that have nice exposure to the shale plays.

TER: A lot of these MLPs are quite large. Is it more encouraging that the “Big Kahuna” is making investments in the shale plays?

YS: Just from the vantage point that Rich Kinder is one of the smartest guys around. Typically, they do an excellent job of trying to identify trends and investing in those trends. Kinder Morgan being there confirms that these shale plays are real, and I think are very viable for the long term. You can make the same case for Enterprise. I mean those guys are extraordinarily bright, as is Energy Transfer’s management.

TER: You mentioned that one of the things making these shale plays viable is the NGLs, which require little processing. But, in your research, you also say that the NGL prices will be somewhat lower for the next while.

YS: You have to be careful because not all shale plays are alike. Some have more NGL content than others. I think it’s sort of good news and bad news. The good news is that there’s a lot of natural gas around. The bad news is that, from a pricing perspective, it’s still supply and demand. If there’s a lot of supply and not that much demand, it does put some pressure on prices.

As we come out of this recession, we’re still building demand. Consequently, natural gas prices are somewhat depressed. We know that crude oil prices are fairly attractive in the $75–$80 range. When natural gas is produced, typically it comes out of the ground wet and has to be processed. The more NGLs produced as a byproduct, the more value that accrues to the producer.

TER: A premium.

YS: Yes. NGL prices tend to track crude because they compete with crude in the petrochemical market. In an environment where natural gas prices are depressed and crude oil prices are strong, NGLs add a really nice premium. Consequently, producers are going to drill in areas that have the liquids-rich natural gas. That’s what we’re seeing, and that’s why the Eagle Ford is such an attractive proposition for producers today.

TER: Which MLPs have a fair amount of exposure to the NGLs?

YS: About a third of Enterprise Products Partners’ business is exposed to the natural gas liquids. They just reported on their second quarter earlier this week. That business was very, very strong. In our universe, that’s the one company that has the most exposure. There are other companies we don’t follow that also have some exposure. ONEOK Partners, L.P. (OKS) is similar to Enterprise in that they have an integrated value chain on the NGL side. There’s a host of smaller MLPs that primarily do natural gas processing. Those would include companies like DCP Midstream Partners, L.P. (DPM), MarkWest Energy Partners, L.P. (MWE) and Targa Resources Partners, L.P. (NGLS). I would classify those companies as more “pure-play” NGL companies.

TER: Going back to your Credit Suisse MLP market overview. It said:

Stock market volatility can present better buying opportunities. However, we are not market timers. We continue to add Boardwalk Pipeline Partners, Enterprise Product Partners and Plains All American Pipeline, L.P. (PAA).

You discussed the first two earlier. Tell us why you like Plains.

YS: What’s so glamorous about Plains All American? They’re focused on the movement of crude oil through pipelines, and they also have large storage operations. They recently did an IPO of their natural gas-storage business — PAA Natural Gas Storage, L.P. (PNG). I’m not enamored necessarily with the crude logistics business, but I am enamored with really strong management teams that have consistently delivered year in and year out and have a track record of providing shareholder value. Plains All American is what I’d like to characterize as my “Rip Van Winkle stock.” I feel I could put my money in Plains and sort of sleep for a while, then wake up to find my investment has grown nicely and feel pretty good about it. That’s the Plains All American story—really exceptional managers, great stewards of capital and just a very, very nice track record.

TER: Can you talk about Boardwalk’s and Enterprise’s management teams?

YS: Boardwalk has very strong pipeline management. They know what they are doing. They benefit from the assistance of Loews Corp. (L), a holding company run by the Tisch family that owns the general partnership (GP), and that has been successful guiding the partnership. Boardwalk also has a very capable natural gas pipeline management team that calibrates risk very well.

Then you have Enterprise Products Partners, which was started by Dan Duncan, an impressive visionary in the industry. EPD is a little more of a risk taker than perhaps Boardwalk. By risk taker, I mean a bit more entrepreneurial. Duncan’s built the largest MLP that has favorable investment characteristics due to its very large footprint; they are well diversified in different businesses. They have the natural gas liquids business, wherein they are the premier NGL publicly traded company. Then they have natural gas pipelines, refined petroleum products pipelines and crude pipelines. And they are very conservatively financed. It’s almost unprecedented to see an MLP that has a 1.2, 1.3 coverage ratio — especially being as large as Enterprise. This is one I’d strongly consider as a core holding among the MLPs.

TER: That’s quite the endorsement. Spectra Energy Partners, L.P. (SEP), Magellan Midstream Partners, L.P. (MMP) and Duncan Energy Partners, L.P. (DEP) are all at the bottom of your capital-cost table. Does this position these MLPs for growth? Or does cheap money often lead to bad decisions?

YS: I would agree that cheap money often leads to bad decisions. We’ve just beared witness to some really bad decisions because of cheap money. As it relates to MLPs (and what I tried to articulate before) is, if MLPs cannot deliver returns in excess of their capital cost, they’re going to be in trouble. Some MLPs have made bad investment decisions, and they have had to face the consequences.

As it relates to the three companies just mentioned, Duncan Energy is basically an affiliate of Enterprise Products Partners. Consequently, Duncan has the same sort of financial discipline as Enterprise. Magellan Midstream? I don’t mean this in a disparaging way but, when I think of Magellan, I usually think of a company that has been very conservatively managed. But they are also prudent stewards of capital. Lastly, Spectra has demonstrated that they, too, are very prudent when it comes to investing capital.

First and foremost, we take our view of management very seriously. If we don’t have a strong conviction that the management team is extremely capable, it’s hard for us to have a favorable view of that company. Needless to say, we feel pretty good that the management teams of the companies we’ve discussed understand risk and finance; and, just as importantly, they understand their businesses.

TER: Among the energy MLPs, you have outperform ratings on Niska Gas Storage Partners, L.L.C. (NKA), Kinder Morgan Management, L.L.C. (KMR) and Energy Transfer Partners. But you also have an outperform rating on ETP’s general partner, Energy Transfer Equity, L.P. (ETE). Tell us about Niska, Kinder Morgan Management and ETE.

YS: Energy Transfer Equity benefits disproportionately when Energy Transfer Partners raises the distribution or issues equity to finance their growth. The general partners own something called “incentive distribution rights.” The incentive distribution rights reward the GP for hitting distribution targets. Consequently, the GP can grow twice as fast as the underlying MLP. Historically, most GPs have grown faster because of those incentive distribution rights. If one is positive on the underlying MLP, it’s not unreasonable to think you may also be positive on the general partner.

TER: Are you saying we’re about to see substantial growth in ETE’s distributions?

YS: We think ETE is positioned for a compounded annual distribution growth rate of 8.6% over the next three years. ETE owns the general partner and limited partnership units in both Energy Transfer Partners and Regency Energy Partners, L.P. (RGNC). As such, ETE stands to benefit from the growth of these two MLPs.

TER: And Kinder Morgan Management?

YS: Think about Kinder Morgan as two classes of securities. One is Kinder Morgan Energy Partners (KMP), which pays their distribution in cash. The other is Kinder Morgan Management (KMR), which pays their distribution in stock. That’s the major difference between KMP and KMR. The other difference is that Kinder Morgan Management is structured such that investors receive a 1099 instead of a K1. That means you can buy KMR and put it in your IRA account, and institutional investors can buy KMR because it’s not generating any unrelated business-taxable income.

TER: That’s why it exists.

YS: It helps with financing, too. It’s an attractive alternative for institutional investors that are sensitive to investing in MLPs. In addition, it helps finance Kinder Morgan’s growth because, if you buy KMR, it’s almost like an automatic dividend reinvestment plan. But for whatever reason, KMR trades at a 10%–13% discount to KMP. We think KMP may be fairly valued and thus we have a neutral rating on it, whereas we think KMR is attractively valued because we see no rational reason for it to trade at such a large discount to KMP. The only real difference between KMR and KMP is that KMR pays their distribution in stock rather than cash.

TER: And Niska?

YS: Niska just did their IPO in May, and Credit Suisse participated in that offering. Niska quite simply is a play on the need for natural-gas storage both in Canada and the U.S. We like Niska because they have plans to expand storage in Canada and California and a very clean balance sheet. In essence, they have pre-financed that growth via their equity offering. We also think that other storage assets owned by private equity may very well be for sale. Niska is likely to participate in those acquisitions, and that should help them grow above and beyond the organic growth already on their drawing board. Finally, we think the management team there is very astute. They have years of experience developing and operating storage. For folks looking to participate in growing natural-gas production and the need for natural-gas storage, Niska’s very capable management makes the company an interesting way to play that.

TER: Do you have any thoughts you would like to leave us with?

YS: You read that quote from our research that said:

Stock market volatility can present better buying opportunities; however, we are not market timers and will continue to add to positions.

I purposely said that because I think readers should differentiate between investing and trading. I view investing in MLPs as a multiyear commitment. The underlying rationale for investing in MLPs is that you’re investing in a cash-flow stream that you think is secure, stable and predictable, which may very well grow. If that’s the case, one shouldn’t be overly concerned about market volatility. Just stay focused on that cash-flow stream and don’t obsess over the day-to-day swings in the stock price. Too many investors do that. My message is to invest in strong companies with good cash flow and visible growth.

I’m also very cognizant of the fact that MLPs have had a really strong run in 2010. They may be due for a pullback, especially if capital markets freeze up. Conversely, if the stock market takes off, then you could see folks pulling out of MLPs to invest in the next herd mentality scheme.

Yves Siegel joined the Credit Suisse Energy Research Team in June 2009 to cover the Master Limited Partnership (MLP) and Natural Gas Pipeline sectors. Immediately prior to joining Credit Suisse, Yves was a senior portfolio manager at a New York hedge fund focused on MLPs. Prior to his buy-side experience, Yves had established a leading sell-side MLP franchise, having spent over 10 years at Wachovia Securities after prior sell-side engagements at Smith Barney and Lehman Brothers. Yves has received both a BA and MBA from New York University and is a CFA charter holder.

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7 Dividend Stocks That REALLY Yield +10%

Posted August 9, 2010 at 12:26 pm

by Jeff Reeves:
 
High-yield dividend stock investing seems to be all the rage right now, as investors look to insulate themselves from share price depreciation via a guaranteed quarterly payday. But the result has been a lot of misinformation about dividends, yield and income investing – and that has confused and frustrated many long term investors.

For instance, if a stock paid a $1 dividend for three straight quarters but cut it to a penny last week, does it really have an annual payout of $3.01? Or if a company pays a massive special dividend, can you really use those numbers to inflate the stock’s yield?

If your stocks are only paying back pennies a share despite claims of being a “high yield dividend stock,” are you really playing it safe? Hopefully these picks will help you find some quality dividend investments.

Here are 7 REAL high yield dividend stocks to consider…

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Big Commodity Dividends

Posted July 25, 2010 at 11:40 pm

by Aaron Levitt:

With interest rates hovering at historical lows and yields on bonds, money markets and CDs at equally as painful levels, income investors are at a quandary; Where to find good distributions, while keeping a level of safety. Investors might find an answer for their portfolios in rising commodity prices.

United States Royalty Trusts, which differ from their Canadian cousins, generate dividend income from the development of natural resources such as coal, natural gas, and crude oil. Designed to be strictly finance vehicles with no production operations, the cash flows generated are subject to the prices of the underlying commodity. Their structure requires them to pay out almost all their royalty income as unit holder distributions. The average dividend yield is in the seven to thirteen percent range. Here a few examples.

While BP (NYSE: BP) is in the dog house, its BP Prudhoe Bay Royalty Trust (NYSE: BPT) is one of the largest oil fields around. The trust currently yields 9 percent.

The Mesabi Trust (NYSE: MSB) is a great way to play the growth in infrastructure. The trust owns interests in various iron ore properties in the Mesabi Iron Range and yields over 14 percent.

The increased usage of natural gas as both a transportation fuel and electricity generator will benefit shareholders in the Permian Basin Royalty Trust (NYSE: PBT). The units currently yield 7.3 percent.

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Original Source

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45 Dividend Champions With Yields Higher Than Long-Term Treasuries

Posted July 24, 2010 at 5:41 am

Today, 10-year Treasuries are yielding 2.99% and 30-year Treasuries are yielding 3.99%. If you are a long-term holder looking for income, that’s a long time to lock in your money at those yields.

At the end of the term, you’ll get your principal back, but it will be shrunken by inflation. If you are looking to buy and sell these for profit, you will need to be very nimble, for as future Treasury yields go up, their principal value will go down. That is the inevitable see-saw relationship between the yields and prices of bonds.

Strong arguments can be made that dividend-paying stocks would be better for long-term income-seekers. They have advantages over bonds, including:

  • The best dividend stocks increase their payouts regularly. They are not “fixed income” investments as bonds are. As the annual distributions increase, your yield (based on what you originally paid) rises.
  • Stock prices are not locked in the price vs. yield see-saw relationship of bonds. Dividend-stock prices can, and often do, rise even as their dividends are increasing. Of course, stocks always bear the risk of falling prices.

It has been widely noted that almost half of the Dow 30 components are now yielding more than 10-year Treasuries. But a better place to look for excellent dividend growth stocks is among the Dividend Champions—stocks that have paid out higher dividends for 25 or more consecutive years. T

he list and its copious supporting data are researched and compiled by David Fish at DRiP Investing Resource Center. The compilation is available here.

I consider this listing to be superior to the better-known Dividend Aristocrats list compiled by S&P. The Dividend Champions document has more than twice as many stocks (100), and it is filled with helpful data such as each company’s industry, the length of its dividend-increase streak, and significant dividend dates. It is updated monthly.

Here are the 21 Dividend Champions yielding more than 30-year Treasuries and the additional 24 Dividend Champions yielding more than 10-year Treasuries. Yields are as of June 30. Stocks are listed in order of declining yields.

See the list here….

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