There are lots of opportunities in the world of energy, but the ones that make great buy and hold opportunities are the ones that pay dividends. For investors who are hungry for dividends, here are three companies that you should consider buying right now.
Finding gold in Davy Jones' locker
Ensco (NYSE:ESV) has been quite the turnaround story. Back in 2008, it was a primarily shallow water rig owner with a paltry dividend of $0.10 per share. Since then, the company has reinvented itself as one of the premiere rig companies in two of the most lucrative rig markets: ultra deepwater floating vessels and harsh environment jackup rigs. This position has led to a doubling in revenue and a near tripling of the drilling contract backlog.
With all that growth, so too has that dividend. This quarter, the company raised its dividend to $3.00 a share on an annualized basis, double what it was a year ago and 3,000% greater than that meager $0.10 it was back in 2008. Based on today's share price, the company's dividend yield comes in at 5.5%. The best part about Ensco, its price-to-earnings ratio minus cash on hand comes in at 8.8.
Taking cash from oil ATMs
Money may not grow on trees, but its been flowing out of wells in the U.S., and LINN Energy (NASDAQ:LINE) is returning lots of that money back to shareholders with a walloping 10% distribution yield -- its called a distribution and not a dividend because it's a master limited partnership.
There have been quite a few concerns about LINN recently regarding both its accounting principles and its ability to cover its distribution, but this quarter the company surprised lots of analysts when it was able to generate more cash than what it paid out. Much of this turnaround is thanks to better-than-expected cost savings from well completions and a focus on more liquids production.
If the paperwork involved in owning an MLP is too much of a headache for you or whoever does your taxes, then LinnCo (NASDAQ:LNCO) may be the way to go. It too has that hefty 10% yield on its dividend.
Be the energy industry's toll booth
By now, it's not even a story anymore when Enterprise Products Partners (NYSE:EPD) raises its distribution. Why? Because it has been doing it for 37 straight quarters. Enterprise Products has a strong niche as one of the largest natural gas liquids pipelines in the country, and it is taking big steps to broaden its reach. Enterprise is about to complete the Seaway pipeline reversal that will deliver 850,000 barrels of oil per day from the clogged oil hub of Cushing, Okla., to the heart of America's refining capacity in the Gulf Coast. Also, the company is investing heavily in processing and port facilities to export liquid petroleum products like butane and propane.
Pipelines and processing facilities may not sound like a high-growth industry, but Enterprise's management has done a fantastic job of creating value in in a low-growth industry. Over the past decade, Enterprise Products Partners has beaten the S&P 500 on a total-return basis -- dividends included -- by four times. On top of it all, that 4.4% distribution provides a pretty impressive income stream.
What a Fool believes
Energy investments both in America and around the world have lots of room to run for years to come. as investors, there are very few ways to make very long-term investments with certainty, but companies with dividends help. If you are more interested in getting income from your investments or are perfectly content repurchasing shares with that dividend, these three energy stocks are hard to pass over.
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