Every income investor wants to own high-yield stocks. And yet, in today’s market, most double-digit yielders are having a hard time finding an audience. The reason is simple: high-yield stocks are not known for their dividend safety. In an era where a four percent payout qualifies as high yield, it would take an extremely generous dividend policy to support a 10% payout. And if the dividend is safe, investors would rush to buy the stock, bidding up its price so that it would no longer offer such a generous yield. In other words, if a company’s yield stays consistently at a very high level, chances are the payout wouldn’t be sustainable.
But there are exceptions. Energy Transfer Partners LP (NYSE:ETP), for instance, offers investors a staggering annual yield of 13.7%. And yet it has more than enough resources to cover its payout. Headquartered in Dallas, Texas, Energy Transfer Partners is in the pipeline business. The partnership’s portfolio consists of approximately 61,000 miles of natural gas pipelines and approximately 2,000 miles of natural gas liquid (NGL) transportation pipelines. Through ETP’s investment in Sunoco Logistics, the partnership has another 8,600 miles of crude oil and NGL and refined products pipelines.
Source: Income Investors
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- The Dark Side of Dividends
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