As regular readers know, cash cows constitute mature businesses. Because they have little in the way of growth prospects, these firms pay out most of their profits as dividends. As a result, these stocks pay out some of the highest yields around. It’s not uncommon to see cash cows paying out yields as high as 12%, 15%, or even 21%. For investors who need portfolio income, these businesses could be the perfect solution.
Case in point: propane distributor Ferrellgas Partners, L.P. (NYSE:FGP). With a dividend yield topping almost 12%, Ferrellgas stock is one of my favorite income streams around. Here’s why. The propane business throws off a lot of cash flow, to begin with. Ferrellgas earns a small fee on every gallon delivered to customers. While propane prices can be volatile from year to year, the actual volume of fuel delivered stays relatively consistent. Most homes built today use alternative forms of energy. As a result, the nation’s use of propane flatlined years ago. So rather than invest in many expansion projects, Ferrellgas is content to just milk its existing operations for easy cash flow.
Source: Income Investors
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- What's Your Retirement Vision?
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