The past few months have been something of a roller coaster ride for major equities, as investor confidence has declined along with broad markets. During times like these, finding returns for your portfolio can be next to impossible, as certain assets will be up one day only to be slaughtered the next. Commodity investors may be especially confused with market performance, as the recent erratic sessions for the U.S. dollar seem to be tossing futures contracts back and forth on a daily basis.But for those looking to find gains in the commodity space, there are still lucrative options out there that offer strong opportunities, particularly those that are offer high yields. Most commodity investors aren’t too concerned with yield, as a fair amount of them tend to be active traders; moving in and out of futures positions multiple times a day. After all, futures contracts are not meant for “buy and hold” investors. Active traders can still profit from a volatile environment such as this, but it is the uncertainty on a daily basis that makes it hard to make the right call on a particular commodity [see also Company Spotlight: First Solar (FSLR)].
Here is where high yield enters; dividends add a steady stream of income that can help boost a portfolio in even the gloomiest of environments. Furthermore, high yields can act as a hedge to inflation, as dividends tend to increase in line with inflation, and also as a hedge against bear markets, as payments still come in during time of economic hardship, assuming the dividends are not suspended (a generally rare occurrence). Dividends are also an indicator of a healthy company; while some companies can cook the books, nothing says business is going well quite like a cash payment to all shareholders.
Consider this, a recent study conducted by Standard & Poor’s revealed that dividend components were responsible for 44% of the total return in the last 80 years of the S&P 500′s history. From 1950 until 2010, an investment of one dollar with dividends and reinvestment would have performed eight times better than a dollar invested in a non-dividend fund; that dividend invested dollar would be worth roughly $500 today. Finding strong yield, however, isn’t always possible in the commodity space but can be easier to come by in oil and gas transportation companies. These firms act as the toll roads of the oil and gas world, providing pipelines and other infrastructure assets that help to move vital commodities around the nation. Thanks to their use no matter what the economic situation, they tend to hold up better than most sectors of the commodity world and are able to spit off high dividend yields regardless of broad market conditions. In light of this, we analyze five high yielding oil and gas pipeline companies to help investors add a dependable income stream to their portfolios [see also Gas Prices Around The Globe: Explaining The Discrepancy].
Whiting USA Trust One (WHX) – Dividend yield of 17.1%
Whiting USA Trust is a royalty of Whiting Petroleum Corporation and was founded in 2007. The subsidiary represents the right to receive 90% of the net proceeds from Whiting’s interests in oil and natural gas producing pipelines, the majority of which lie in the Rocky Mountain and Gulf Coast regions of the US. The company then passes on distributions to its shareholders, allowing it to pay out a robust yield. But investors should be wary that while this stock is paying out a dividend of 17%, its 19% losses on the year may be of some major concern to those who are unsure of how this stock will fair in our current environment [see also The Ultimate Guide To Natural Gas Investing].
Energy Transfer Partners L.P. (ETP) – Dividend Yield of 8.2%
ETP is a master limited partnership (MLP) and derives its business primarily from the infrastructure and transportation of the natural gas. The company has pipelines all over the country, including Arizona and Colorado, on top of owning the largest intrastate pipeline in Texas. The MLP is one of the largest propane retailers in the U.S. as well as owning a fair amount of liquid natural gas storage and transportation assets. The stock price for ETP is no stranger to big swings, but for those willing to stomach the volatility, the 8% dividend yield will surely add a nice income stream to your portfolio.
Boardwalk Pipeline Partners, LP (BWP) – Dividend Yield of 7.9%
Another MLP, Boardwalk is primarily engaged in the transportation and storage of liquid natural gas. In fact, in 2010 their systems carried approximately 10% of the nation’s average daily consumption of natural gas, making them a major player in the oil & gas pipeline sector. The company has over 14,000 miles of pipeline through out 12 states, as well as three subsidiaries to keep operations focused in different regions across the US. BWP is one of the larger companies on this list, as their market cap comes in at just over $5 billion with a P/E ratio of nearly 23. But while the 7.9% yield seems like an attractive option, investors should consider that BWP’s current quarterly earnings growth (yoy) is -72%, painting a hazy future for this stock in the near term [see also Three ETFs For NatGas Act 2011].
Enbridge Energy Partners LP (EEP) – Dividend Yield of 7.7%
Right off the bat, investors will notice that EEP is a relatively popular stock, as it changes hands over 630,000 times daily with a market cap nearing $7 billion. The company has a more broad based business model that transports crude as well as natural gas. EEP split its shares in April of this year, and has been a relatively strong performer over the trailing 52-weeks, while other stocks on this list cannot say the same. Investors should note that the EPS of this stock is -1 for the time being, so while it may have strong growth prospects, it is currently operating in the red.
DCP Midstream Partners LP (DPM) – Dividend Yield of 6.5%
The final company on this list is another MLP with an attractive yield. DCP Midstream is headquartered in Denver and “leads the midstream segment as the second-largest natural gas gatherer and processor, is the largest natural gas liquids producer, and is one of the largest marketers of natural gas and natural gas by-products in the United States”. Another noteworthy characteristic is that DCP is a 50/50 joint venture between Spectra Energy and the massive ConocoPhillips. DPM’s P/E ratio of 137.5 suggests that they don’t have much in the way of earnings but their stock has performed well in the last year, which may make it a good candidate for an income addition to an investment portfolio.
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Disclosure: Photo courtesy of Glen Dillon. No positions at time of writing.
[...] It used to be that commodity exposure was left primarily for active traders, as complex and risky futures contracts were the primary way to allocate to these investment options. Now, with the help of the rapidly expanding ETF industry, investors can establish a long term exposure to commodities without having to play the futures markets by trading on margin. There are exchange traded products that execute a roll process on a monthly basis to maintain constant futures exposure and there are also ETFs that offer physical exposure to a particular commodity like gold. These options have only just emerged in the past few years, leading many investors to be skeptical of commodity exposure as a part of a long-term portfolio, but these investments offer a wealth of opportunities for traders [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] ExxonMobil (XOM) is not only the largest oil producer on the map, but is also the largest company in the world by market capitalization (though Apple is nipping at its heels). With a dividend payout of 2.5% and an average daily volume of 24.4 million shares, this stock is clearly an investor favorite. Exxon is a multinational company that is also working to bring alternate fuels to market like hydrogen, but with just seven years of oil left, XOM may take a bit of a blow once our reserves start to run out [see also Analyzing Five High Yielding Oil Gas Pipeline Stocks]. [...]
[...] ExxonMobil (XOM) is not only the largest oil producer on the map, but is also the largest company in the world by market capitalization (though Apple is nipping at its heels). With a dividend payout of 2.5% and an average daily volume of 24.4 million shares, this stock is clearly an investor favorite. Exxon is a multinational company that is also working to bring alternate fuels to market like hydrogen, but with just seven years of oil left, XOM may take a bit of a blow once our reserves start to run out [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] For those investors who understand the ins and outs of mining stocks, these securities can be big boosts to a portfolio, as some of these firms offer robust yields. A constant dividend stream for a portfolio can add a significant amount of value beyond steady income. Dividends help investors hedge against inflation as well as bear markets; a timely investment being that many feel that the U.S. is on the verge of slipping into another dismal bear period. Dividends are usually good barometers for the health of a company; while aggressive accounting can cover business deterioration, a direct cash payment to all investors suggests that business is going quite well [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] Wind’s appeal as an investment stems from its wide use throughout the globe. As such a popular commodity with such a strong growth outlook, investors can use wind power to make plays against strong and weak economies. An investment in wind power can also be used to make a play on weather conditions or to hedge against crude oil and natural gas [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] Today Batista’s EBX Group owns a wide variety of subsidiaries, the majority of which deal with commodities, with their largest output coming from iron ore. Batista’s operation also has its hands in a number of other operations like natural gas and crude exploration as well as a more recent venture into a solar plant in Brazil. He has become famous for big bets in precious metals and the mining industry overall, with several of the underlying subsidiaries of the EBX Group dedicated to mining. As of 2011, Eike Batista has an estimated net worth of over $30 billion and was names Forbes’ 8th richest man in the world, giving him a large amount of power and influence in the commodity space that he already dominates [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] While not as popular in the states, hydropower has established itself as a powerful renewable source around the world. Hydropower, of course, is generated by moving forms of water and is most often utilized at major dams and rivers. Though it has a long history of use in farms, hydropower is one of the least popular alternative energies. This may make it a great growth opportunity, or simply an asset class that you will want to avoid. Note that U.S. exposure to these stocks is hard to come by [see also Analyzing Five High Yielding Oil Gas Pipeline Stocks]. [...]
[...] With 2011 presenting an unseasonably warm November, natural gas stockpiles have soared to new highs. As demand has dipped, inventories have shot well above their five year average, with the EIA reporting a rise on almost a consistent basis. In fact, other than last week, the most recent drop in inventory came way back in April, putting natural gas on a slippery slope for the last few months. But as we make our way into the winter months, demand for this commodity will no doubt rise, as people will need to beat the cold any way they can. With that in mind, natural gas’ beaten down price creates a unique trading opportunity for today’s markets [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] Friday the 13th reared its unlucky head on markets today as equities took a bit hit on some major events. Despite all of the bad news that plagued markets, equities were able to resist a major sell-off that would be expected given the severity of today’s headlines. The Dow lost about 50 points while the S&P 500 dipped by about 0.5%; to put it quite frankly, the day could have been much worse. After Standard and Poor’s announced the official downgrade of France, investors quickly became fearful that the news would infect the markets and spark a sell-off like the one we saw last August when the U.S. suffered a downgrade [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] Friday the 13th reared its unlucky head on markets today as equities took a bit hit on some major events. Despite all of the bad news that plagued markets, equities were able to resist a major sell-off that would be expected given the severity of today’s headlines. The Dow lost about 50 points while the S&P 500 dipped by about 0.5%; to put it quite frankly, the day could have been much worse. After Standard and Poor’s announced the official downgrade of France, investors quickly became fearful that the news would infect the markets and spark a sell-off like the one we saw last August when the U.S. suffered a downgrade [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] Beyond API gravity, investors also need to take into consideration how sweet or sour a petroleum is. This is generally based on the sulfur content of the underlying fuel with 0.5% being a key benchmark. When oil has a total sulfur level greater than half a percent, then it is considered sour while a content less than 0.5% indicates that an oil is ‘sweet’. Sour oil is more prevalent than its sweet counterpart and it comes from oil sands in Canada, the Gulf of Mexico, some South American nations as well as most of the Middle East. Sweet crude, on the other hand, is generally produced in the central U.S., the North Sea region of Europe, as well as much of Africa and the Asia Pacific region. While both types are useful, end users generally prefer sweet crude as it requires less processing in order to remove impurities than its sour counterpart. So in summary, light and sweet forms of crude oil are heavily prized while heavy sour types of fuel often trade at a discount to their more in-demand cousins [read Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] There is a fair amount of confusion over what exactly a K-1 is and what receiving one of these statements means. A K-1 is a tax document used to report share of profits and losses from interests in limited partnerships. These documents become relevant because many exchange-traded products are technically structured as partnerships, meaning that investors are actually limited partners. Partnerships are typically not required to pay taxes directly, instead passing through those obligations to individual partners. They do that by sending a K-1 to partners each year detailing their interest in the operations of the partnership [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] 21. Boardwalk Pipeline Partners, LP (BWP): Operating over 14,000 miles of pipeline, BWP has an aggregate gas capacity of around 167 billion cubic feet. The stock pays out a dividend of 7.4% [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] Below we profile seven smaller dividend ETFs that offer compelling investment strategies [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]: [...]
[...] particular as this often times overlooked corner of the domestic energy market offers attractive, steady dividend distributions similar to utility companies [see also Five Commodity MLPs With Sky High [...]
[...] While not as popular in the states, hydropower has established itself as a powerful renewable source around the world. Hydropower, of course, is generated by moving forms of water and is most often utilized at major dams and rivers. Though it has a long history of use in farms, hydropower is one of the least popular alternative energies. This may make it a great growth opportunity, or simply an asset class that you will want to avoid. Note that U.S. exposure to these stocks is hard to come by [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]
[...] of the fund’s portfolio. Moreover, given that the aforementioned companies offer current dividend yields of 6.3%, 3.7%, and 3.4% respectively, it would seem that this fund should continue to be in [...]
[...] There is a fair amount of confusion over what exactly a K-1 is and what receiving one of these statements means. A K-1 is a tax document used to report share of profits and losses from interests in limited partnerships. These documents become relevant because many exchange-traded products are technically structured as partnerships, meaning that investors are actually limited partners. Partnerships are typically not required to pay taxes directly, instead they pass those obligations to individual partners. They do that by sending a K-1 to partners each year detailing their interest in the operations of the partnership [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks]. [...]