Energy prices are beginning to get more volatile. Meanwhile, demand and supplies remain in imbalance. That set-up is an interesting yet difficult environment for investors – one that the stability of our Best Energy Dividend Stocks List pick is able to navigate with ease. This is evident by our pick’s nearly twenty years’ worth of dividend increases across a variety of energy cycles.
In the search for the Best Energy Dividend Stocks, 16 factors are scored across Energy sector dividend stocks and only the best combination of attractive yield, dividend safety, returns potential and low returns risk receive a Buy rating. Our process is systematic, goal-focused and designed for moderate-risk investors with a long-term horizon seeking allocation to Energy.
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The secret to our pick’s success is its focus on the midstream sector. Moving crude oil around comes with plenty of toll-road-like fees based on volume, removing much of the commodity pricing risk from our pick’s bottom line. Our pick, which started out nearly 20 years ago as a spin-off of an energy company’s crude oil infrastructure assets has made several large buyouts, particularly from Shell and BP, to build its size. Today, its nearly 11,000 miles worth of pipelines is one of the largest crude oil systems in the nation, covering the bulk of refined products shipped in the U.S. That produces plenty of cash flows to reward investors.
As such, our pick is a well-covered large-cap Energy MLP that is yielding an attractive 8.49% with a $4.190/shr forward dividend that is paid quarterly. Their $10.2B market cap ranks 5th out of 29 dividend stocks in the Energy MLP industry, the largest being Enterprise Products Partners (EPD) at $51.1B, and they have $5.2B in debt and $8.1M in cash.
This BUY rating is also supported from both the sell-side and buy-side, with analysts having an average rating of HOLD, with expectations for FFO/share to grow a modest 6% next year. Relative to the 52-week highs, the stock is outperforming the S&P 500 at -9% vs -21% and is an average performing Energy MLPs, which are -13% as a group.
Year-to-date, our pick has managed to return 8% vs -19% for the S&P 500 and 23% for the Energy MLP industry.
