The S&P 500's dividend yield is a paltry 1.1% these days. That's approaching its all-time low. As a result, fewer stocks are offering compelling income streams right now.
However, there are some enticing options available. Delek Logistics Partners (DKL +0.46%), Hess Midstream (HESM +1.15%), and Plains All American Pipeline (PAA +0.92%) currently offer yields of up to 9%. Even better, all three companies recently increased their payouts.
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The streak continues
Delek Logistics Partners recently declared its quarterly distribution payment. The master limited partnership (MLP) set its rate at $1.125 per unit ($4.50 annualized). That's a slight 0.4% bump from what it paid last quarter. This raise extended its distribution growth streak to 52 consecutive quarters, while raising its yield to 9%.
The MLP, which sends investors a Schedule K-1 Federal tax form each year, generates relatively stable cash flows backed by long-term midstream services contracts. It produced enough cash to cover its distribution payment by over 1.3 times last year. That gave it some cushion while allowing it to retain some money to reinvest in expansion projects and maintain its financial flexibility.
NYSE: DKL
Key Data Points
Delek completed its Libby 2 gas processing plant last year and also closed its acquisition of Gravity Water. It's currently working on a comprehensive acid gas injection and sour gas treating solution at its Libby Gas Complex. These investments should enable the MLP to continue raising its lucrative distribution payment.
The steady growth continues
Hess Midstream also recently announced its latest quarterly cash distribution payment. It's paying $0.7641 per share, a 1.2% increase compared to the prior quarter. That continues the steadily quarterly growth in its payout, which now yields 8.2%. Since 2021, Hess Midstream has hiked its dividend by 65%.
NYSE: HESM
Key Data Points
The pipeline company generates very stable cash flow, supported by long-term midstream contracts with leading oil and gas producers such as Chevron. It currently has 100% fee-based minimum-volume contracts that lock in its cash flow floor through 2028. That gives it tremendous visibility into its future cash flow.
Hess Midstream currently expects to increase its dividend by at least 5% annually through 2028. Even with that growth, the company anticipates producing about $1 billion in excess free cash flow during that period, which it can use for additional shareholder returns or to strengthen its already rock-solid balance sheet.
The high-octane growth continues
Plains All American Pipeline announced its latest quarterly distribution payment earlier this year. The oil pipeline company will pay $0.4175 per unit ($1.67 annualized). That's a 10% increase from its prior level. Plains has grown its payout at a 21% compound annual rate over the last four years. Its latest raise pushed its yield to 8.5%.
NASDAQ: PAA
Key Data Points
The MLP is enhancing the sustainability of its operations and financial position. Last year, it agreed to sell its Canadian natural gas liquids business for $3.8 billion in a deal that should close this year. That business generates more volatile cash flows due to its commodity price exposure. Plains is recycling capital from that sale into enhancing its oil pipeline operations. It bought the EPIC Crude Oil Pipeline (renamed Cactus III) in a two-phased deal last year for a total of $2.9 billion.
Plains All American Pipeline has the financial flexibility to invest in organic expansion projects and make bolt-on acquisitions. These investments will help grow the MLP's cash flow, enabling it to continue increasing its high-yielding distribution.
High-yielding and steadily growing payouts
The energy midstream sector is often a great place to find attractive passive income investment opportunities. Delek Logistics Partners, Hess Midstream, and Plains All American Pipeline currently have yields between 8% and 9%. Even better, all three pipeline companies routinely raise their payments, which seems likely to continue. That makes them intriguing options for those seeking lucrative passive income streams.
