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 (NYSE:KMP), Energy Transfer Partners (NYSE:ETP), and Kinder Morgan Management (NYSE:KMR).
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
Adam Galas has no position in any stocks mentioned. The Motley Fool recommends Kinder Morgan. The Motley Fool owns shares of Kinder Morgan. 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.