Dividend Detective Finds High-Yielding MLP

09/23/2016 8:00 am EST


Harry Domash

Publisher, DividendDetective and Winning Investing

The market is typically weak in September and early October and then rallies until year-end. So, we expect a similar pattern this year, observes Harry Domash, income expert and editor of the Dividend Detective.

If you’re looking for fast growing dividends, consider our new Energy MLP Portfolio pick that we expect to grow distributions (dividends) around 25% annually.

In theory, since they mainly get paid to transport and store the commodities, pipeline operators shouldn’t have been hurt much when oil and nat-gas prices plunged last year.

But, in fact, most pipeline operators were hit hard because many of the oil and nat-gas producers that they serviced ended up bankrupt. But that was then.

Now, even if oil prices stay low, the oil exploration and production landscape has stabilized and we expect few new surprises in terms of unexpected bankruptcies.

We’re adding crude oil pipeline operator Phillips 66 Partners (PSXP) to Energy MLP model portfolio.

A July 2013 IPO, PSXP was formed by oil industry giant Phillips 66 to develop, own and operate fee-based crude oil and refined petroleum products (e.g. gasoline) pipelines and associated facilities.

Driven by acquisitions dropped down from Phillips as well as from other sources, analysts expect at least 25% annual distribution growth for at least the next two years.

Given the size of its general partner, we view PSXP as a relatively low-risk growth play.

While its 4.1% dividend yield won’t knock your socks off, keep in mind that it is dividend growth (supported by EPS growth) that drives share prices up. And PSXP has that in spades.

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By Harry Domash, Editor of The Dividend Detective

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