In a bloated stock market, yield-seeking investors are often drawn to the down-and-out stocks. But to be honest, most of these stocks are down for a good reason. If investors are not careful, they could end up with a yield trap rather than an income opportunity. That’s why here at Income Investors, I always urge people to check a company’s dividend safety before putting in a “buy” order. If the payout is not safe, the stock would not be worth owning, no matter how high its yield is.
Summit Midstream Partners LP (NYSE:SMLP) is one of the beaten-down tickers in today’s market. As a master limited partnership from the midstream energy sector, SMLP stock has had a huge downfall since oil and gas prices crashed in the summer of 2014. And while commodity prices have recovered quite a bit, investor sentiment did not change much for this energy partnership. Year-to-date, SMLP stock is down nearly 30%. As is the case with many out-of-favor energy stocks, the inverse relationship between share price and dividend yield has boosted SMLP stock’s appeal in the eyes of yield-seeking investors. Trading at $15.12 per unit, Summit Midstream Partners LP offers a staggering annual yield of 15.2%. Of course, this could easily be another yield trap. So before taking out your wallet, let’s check the partnership’s financials.
Source: Income Investors
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