"Do you know the only thing that gives me pleasure? It's to see my dividends coming in."
-- John D. Rockefeller
While I don't love dividends to the same degree as John Rockefeller, I'm still a pretty big fan of dividend-paying stocks. One reason is simply that dividends are great for offsetting bills I hate to pay.
For example, last winter I paid my natural gas utility a grand total of $666.55 to provide natural gas to heat my home. However, thanks to my investments in oil and gas companies, I was paid $650.38 to offset that gas bill. Because of those dividends I basically paid virtually nothing to heat my home last year. That'll probably be the case again this year, and the year after that, and so on and so forth as the dividend payments from my energy investments continue to pile up in my account.
My energy dividend stocks
I've been building out my energy dividend portfolio for years in the hopes of one day offsetting my total energy spend. For most of last year I owned five energy dividend stocks. These holdings included LINN Energy (OTC:LINEQ), LinnCo (NASDAQ: LNCO), Enterprise Products Partners (NYSE:EPD), ConocoPhillips (NYSE:COP), and Phillips 66 (NYSE:PSX). I've owned LINN Energy and Enterprise Products Partners since 2007, while ConocoPhillips joined my portfolio in the aftermath of the financial crisis.
Because I've owned LINN Energy and Enterprise Products Partners for so long, I have a much lower cost basis and significantly higher yield than investors buying today. In fact, I'm earning a more than 10% yield on my initial investment in both. Similarly, my investment in ConocoPhillips is yielding more than 5%, and I was given shares of Phillips 66, which I now also hold.
Add up the income from just these five holdings, and I've offset nearly 100% of my natural gas bill from last year. I do still have a way to go when I add in what I spend on gasoline, as just 19% of my total energy spend from last year was offset. However, over time I hope to offset 100% of my energy consumption through both personal energy efficiency as well as adding more energy dividends to my portfolio.
Why I have no plans to sell
All five of my energy dividends have delivered for me over the long term. Not only has each holding delivered solid capital gains, but all have consistently raised the payout since my initial investment. Phillips 66, for example, has nearly doubled its payout since going public just two years ago. Meanwhile, Enterprise Products Partners has raised its distribution to investors like me every single quarter since I bought my units.
I expect to continue to see increased dividends from all five holdings in the years to come. ConocoPhillips, for example, is planning to grow both its production and its margins by 3%-5% annually through 2017. As it does, I expect to see some of the increase in profits sent back my way. Similarly, both Enterprise Product Partners and Phillips 66 are investing billions to build out critical infrastructure to move and process all of the oil and gas that drillers like ConocoPhillips and LINN Energy expect to produce in the years to come. This visible growth is why I'm confident that my income will keep heading higher in the years to come. That's why I have no plans to sell, despite what Jim Cramer thinks.
It took about seven years of slowly buying energy stocks, but last year I was able to offset one of my energy related bills. Instead of spending that cash to pay bills I've elected to reinvest it into new energy dividends. That plan, along with new investments along the way, will one day allow me to be energy independent as I work my way toward total financial independence.