Dividends are hot right now, and for good reason. Between 1968 and 2007 the the top 100 yielding S&P 500 companies outperformed the total index by 28.4% annually; however, as great as high yield is, dividend growth is even better.
Between 1972 and 2004, those S&P 500 stocks that raised their dividends posted 24.6% better annual performance than the S&P 500 at large and 122% better than those that didn't pay dividends at all.
GasLog (NYSE:GLOG) represents one of the best LNG shippers in the world and may become one of the best dividend growth stocks of the next decade. For those seeking less growth and higher income, its MLP GasLog Partners (NYSE:GLOP) is also a terrific option for investing in one of the best growth industries of the next half century.
LNG shipping: massive potential
Current world supply of liquefied natural gas (LNG) stands at 281 mtpa (million metric tons per annum), but 110 mtpa are currently under construction in places such as Algeria, Australia, Siberia, and Papua New Guinea. Another 190 mtpa of capacity has been proposed from 20 LNG export projects in America, and with US natural gas production expected to increase 56% by 2040 LNG trade is sure to grow immensely. Chinese demand alone will grow 5.9% annually through 2035, and China and India are planning on tripling their import capacity by 2018.
GasLog: future dividend growth champion
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Into this enormous long-term energy megatrend steps GasLog, one of the fastest growing and best managed LNG shippers in the world. GasLog owns 13 LNG tankers with another 10 on order and an option to order two more.
The investment thesis for GasLog and GasLog Partners is built on three things: managerial excellence, industry-leading profitability, and stunning growth potential.
GasLog may have IPOed in 2012, but it's been in the LNG shipping game since 2001 when it took over managing the tanker fleet of BG Group, the world's largest producer and trader of LNG.
Its management team is made up of seasoned industry veterans, with long track records at shipping giants such as Maersk, Teekay Shipping, Teekay Tanker Services, and offshore oil driller Transocean.
The combination of a close relationship with BG and an excellent management team results in a distinct growth advantage for GasLog. For example, this past quarter BG sold three of the tankers GasLog had been managing to GasLog for $468 million. Each vessel comes with a six-year charter that provides predictable cash flow for GasLog to grow its dividend or drop down to GasLog Partners. In the future, GasLog may be able to maintain a faster fleet growth rate than its competitors thanks to this beneficial relationship.
In terms of profitability and growth GasLog is among the best in the industry.
- gross margins of 45.7% vs industry average 18.4%
- net margins of 29.8% vs industry average 4.9%
- three year average revenue growth rate 58% vs industry average of 4.8%
- three year average earnings growth of 79.5% vs industry average -8%
GasLog provides long-term dividend growth investors a chance to invest into an energy megatrend that will last for decades and fuel immense growth of wealth and income. Its seasoned management, close ties with BG group, and industry-leading profitability make GasLog a best-of-breed LNG shipper whose potential for dividend growth is likely to make it one of the best investments of the next 10 years. For those seeking higher income but still hungering for market beating long-term total returns, GasLog Partners offers an amazing chance to get in on the ground floor of what is sure to be one of the best MLP growth stories of the next few years.
Adam Galas has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.