Numerous studies show that high-yielding dividend growth stocks generate the best long-term total returns. For example, between 1972 and 2004 dividend growth companies in the S&P 500 outperformed their non-dividend peers by an average of 122% annually.
This article highlights five investments: Energy Transfer Equity (NYSE: ETE), Kinder Morgan Inc (NYSE:KMI), Kinder Morgan Energy Partners (UNKNOWN:KMP.DL), Energy Transfer Partners (NYSE:ETP), and Kinder Morgan Management (UNKNOWN:KMR.DL).
Note: MLPs pay distributions, not dividends. Distributions are tax differed and require a K-1 form instead of a 1099 form. They can cause tax headaches when held in tax deferred accounts such as IRAs.
Kinder Morgan and Energy Transfer have long track records of strong dividend/distribution growth and market outperformance.
Each of these five companies/MLPs is set to continue its winning streak, fueled by America's historic energy boom, which is estimated to require $890 billion in investment through 2026. This is projected to create as many as 1.1 million jobs and singlehandedly raise America's GDP growth rate by as much as .75% per year.
Market-crushing returns from oil and gas pipelines
|MLP||Yield||10 year Projected Annual Distribution Growth||10 Year Projected Annual Earnings Growth||10 Year Projected Annual Total Return|
|Enterprise Transfer Partners||6.60%||4.03%||4%||10.63%|
|Energy Transfer Equity||2.60%||18.46%||18.70%||21.30%|
|Kinder Morgan Energy Partners||6.90%||5.74%||7.90%||12.64%|
|Kinder Morgan Management||7.20%||5.74%||7.90%||12.94%|
|Kinder Morgan Inc||4.70%||7.96%||8.70%||12.66%|
Energy Transfer Partners and its general partner, Energy Transfer Equity, are likely to grow rich from three major energy trends: natural gas-fueled energy generation, use of natural gas liquids (NGLs) for petrochemicals, and liquefied natural gas (LNG) exports.
Bloomberg estimates that gas-fired electricity capacity grew by 13.6% between 2010 and 2013 despite a 1.6% decrease in overall energy demand. The company estimates this will grow by another 17% through 2020. Kinder Morgan estimates this will grow demand by 7.2 billion cubic feet/day (bcf/d) by 2024.
Meanwhile, NGL production is expected to soar 60% by 2020 to over 1 million bpd.
This will provide cheaper feedstocks for the petrochemical industry, which is investing $176 billion to build, overhaul, and construct infrastructure for 148 chemical facilities along the Gulf Coast.
LNG exports are a major way America will deal with the excess gas produced by our estimated 56% increase in gas production through 2040.
Through April, the Department of Energy has approved six export facilities with capacity of 9.3 bcf/d, 12.6% of 2014 gas production. Total proposed export projects total 30.55 bcf/d representing 30% of 2024 projected gas production.
Energy Transfer Partners is part of the Energy Transfer $90 billion empire that spans what is soon to be five MLPs with a total of:
- 61,900 miles of pipelines
- 42 storage and export terminals
- 25 processing facilities
- 6,400 gas stations