Calumet Specialty Products Partners, L.P. (NASDAQ:CLMT) is certainly a high yield stock. Currently, the company is yielding 9.87%. Even better is the fact that Calumet Specialty Products Partners has been able to steadily grow its payout over the past few years, as we can see from the following chart.

CLMT Chart

CLMT data by YCharts

While distribution growth slowed down in recent years, the company is investing in a number of organic growth projects to boost its earnings. Further, the company has been an active acquirer, having completed several deals to bolster its income stream. Add it all up and we have a compelling high yield stock with a lot of future growth potential that could push its yield even higher in the future.

Getting to know Calumet Specialty Products Partners

Calumet Specialty Products Partners is structured as a master limited partnership, however its focus is a little different than most other MLPs. Instead of focusing on the upstream (oil and gas production) or downstream (pipelines and processing plants) segments of the energy industry like most other MLPs, Calumet Specialty Products Partners is focused on the downstream segment as it turns oil into higher valued petroleum-based products.

Ninety percent of its gross profit comes from its specialty division, which consists of 10 specialty product facilities that manufacture more than 6,000 products including automotive oil, solvents, waxes, and asphalt. The company also operates four fuel product refineries that produce gasoline, diesel, and jet fuel, which contributes 10% of its gross profit. As the following map shows, the company's operations are spread out across the U.S.

Calumet Specialty Products Partners Lp Map

Source: Calumet Specialty Products Partners, L.P. Investor Presentation

Over the years Calumet has gone from a niche specialty lubricants company into an integrated, independent specialty hydrocarbon business. Its strategy is to have a business that spans from rig-to-retail as it profits from upgrading oil and natural gas into higher valued petroleum products.

How Calumet Specialty Products Partners plans to grow

Calumet Specialty Products Partners is making big investments to grow both divisions. The company currently has four organic growth projects under way totaling $580 million. These projects should start delivering earnings in early 2015 with the last project scheduled to be complete by the first quarter of 2016. The purpose of these investments is to take greater advantage of cheap North America crude oil as two of its projects involve growing its oil refining capacity. Calumet is actually building the first new refinery in the U.S. since 1976 while also doubling the capacity of an existing refinery.

On top of those organic growth projects the company spent $308 million in the past year to acquire companies to support its specialty product segment. The largest acquisition was Anchor Drilling Fluids, which manufactures drilling fluid solutions, completion fluids, and production chemicals for the oil and gas industry. Soon after completing that deal Calumet added Specialty Oilfield Solutions, which was a bolt-on deal made to complement Anchor. These acquisitions enable the company to grow its manufacturing capacity and product diversity as well as boost its income. 

What could go wrong?

Calumet plans to continue to grow organically as well as make targeted acquisitions as it builds out its fuel and specialty product divisions. That being said, this growth is coming at a big cost to Calumet as it is really levering up its business to grow. As this following slide shows, the company's debt ratios are at very high levels.

Calumet Specialty Products Partners Lp Debt

Source: Calumet Specialty Products Partners, L.P. Investor Presentation

This is a risk investors need to monitor. However, the company is taking steps to ensure it has the cash flow necessary to maintain that debt as it completes its growth projects. One of the steps it's taking is to engage in a robust hedging program that will help it mitigate market volatility in its fuel product segment. On top of that the company boosted its liquidity so that it has plenty of capital to keep itself funded until its organic growth projects come online. As long as it maintains adequate liquidity the company's high yield shouldn't be in any trouble. 

Investor takeaway

Calumet Specialty Products Partners has a big yield that looks like it will grow even bigger over the next few years. While the company's debt is a concern, those concerns should eventually fade away as these projects come online and produce income. Overall, this is a pretty compelling company for dividend investors looking for a high yield stock.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.