Investors have plenty of important information to cull as we dive headlong into a barrage of fourth-quarter earnings announcements for American energy companies -- not the least of which are dividend and distribution increases.
Some energy companies only increase their dividend once a year, while others may give it a gentle boost of 1% to 2% every quarter. The three companies we're looking at today, however, all boosted their dividends by 4% or more on a sequential basis, and they are today's three candidates for your portfolio's next yield engine.
1. Targa Resources Corp (TRGP -0.70%)
Targa Resources is the general partner of Targa Resources Partners (NYSE: NGLS), the master limited partnership that owns and operates all the assets in the Targa family. As a general partner, it is privy to a chunk of the MLP's cash every quarter in the form of incentive distribution rights. Targa is one of the most important players in the natural gas liquids business, with some natural gas and crude-oil services thrown in for good measure.
Targa Resources increased its dividend 7% quarter over quarter, and an outstanding 33% year over year. The third quarter was a record quarter for Targa, and investors are hoping for more of the same when the company reports fourth quarter results on Feb. 13.
2. Tallgrass Energy Partners LP (NYSE: TEP)
Tallgrass only went public last year, but it has wasted very little time ratcheting up its distribution. The fledgling partnership increased its distribution 5.9% over last quarter's payout. It has yet to put a full year of public trading on the books, but this quarterly distribution of $0.3150 per unit is 9.6% higher than its minimum quarterly distribution.
Tallgrass Energy's assets are concentrated in the Niobrara Shale and the Mississippi Lime formation and consist of 5,100 miles of natural gas pipeline, a natural gas storage facility, two natural gas processing plants, and a natural gas treating facility.
3. Hi-Crush Partners LP (HCRS.Q)
Hi-Crush is in the frac sand game, making it a crucial component of America's energy renaissance. The partnership produces and markets proppant used in the hydraulic fracturing of oil and gas wells. It was the second-best performing MLP of 2013, posting a total return of 168%.
Hi-Crush increased its distribution 4% over the prior quarter, marking its second straight quarterly distribution increase. It is relatively new to the street, debuting in August of 2012, and had only paid out its minimum quarterly distribution for every quarter prior to 2013's Q3 and Q4.
Bottom line
Distribution growth should never be the only reason you buy a stock, but it can be a good indicator of a very strong business, especially when the growth pattern bears out over the course of several years.
