These 2 MLPs Outrun Lower Oil Prices With 100%-Plus Earnings Growth

These 2 MLPs Outrun Lower Oil Prices With 100%-Plus Earnings Growth

Energy commodity prices have been extremely volatile of late. Crude oil is down more than 20% in the past month, while natural gas is up more than 40% over the same period.

The result is that some of the most stable names in the energy sector, master limited partnerships (MLPs), have lost 6% or more in the past month, wiping out the benefit of an attractive annual dividend yield.

However, one thing that remains constant over time is that the market rewards faster earnings growth in stocks, even with income-oriented names. Higher profits can lead to higher future dividends, which in turn helps investors build wealth, even as inflation is rising.

With that in mind, I’ve found two MLPs with hefty dividends that more than doubled earnings per share in the third quarter.

EPS-Doubling MLP No. 1: Slow, But Steady Distribution Growth

Enterprise Products Partners (EPD) is an MLP with about 50,000 miles of pipelines that carry oil, natural gas and related products. The company also operates a network of processing and storage facilities for energy commodities.

Last month, Enterprise posted third-quarter earnings of $0.60 a share, which was ahead of the consensus analyst estimate and 100% growth from the previous year. Upside in the period was driven by higher natural gas and natural gas liquids (NGL) demand and the momentum could continue beyond the current quarter.

It also doesn’t hurt that natural gas prices are up 40% in the past month. However, pipeline operators are considered the “toll keepers” of the energy sector and profits are generally more insulated to vicious swings in commodity prices.

Consensus estimates call for the company to average 15% earnings annual earnings growth over the next three years. This growth is being fueled by $6.6 billion of capital investment projects, the majority of which are in the NGL space.

Enterprise has a quarterly distribution of $0.4325 a share (6.6% yield) that management increased back in October. The company has boosted the dividend 20 consecutive years, including each and every quarter since late 2004—recently at a pace of $0.0025 per quarter

Enterprise generated enough distributable cash flow (DCF) to cover the payout 1.6x in the first three quarters of 2018. The company also has a strong balance sheet and its debt carries an investment-grade rating.

EPS-Doubling MLP No. 2: Logistics Growth Funding Higher Distribution

MPLX (MPLX) is another MLP with about 10,000 miles of pipelines that carry oil and refined products. In addition, the company has gathering and processing operations for natural gas and NGL.

Earlier this month, MPLX delivered third-quarter earnings of $0.62 a share, exceeding the consensus analyst estimate. Management leveraged a 75% year-over-year increase in revenue to 113% profit growth in the period, driven by higher demand for services, like logistics and storage.

The company has a quarterly distribution of $0.6375 a share (8% yield) that management raised back in October. While it’s a shorter streak than Enterprise, MPLX has increased the dividend 23 consecutive quarters and covered the payout 1.5x with DCF in the third quarter.

100%-Plus Earnings Growth Without Riding the Commodities Rollercoaster

These MLP’s are doubling profits and managing modest dividend growth, but the underlying stocks don’t seem to care since the price of crude oil has lost 20% in the past month. Chasing the highest growth from one quarter to the next doesn’t always pay, if volatile commodity prices can create losses that eat away at your dividend income.

But what if there were a group of stocks that could provide growth and income on a consistent basis, only flying under the market’s radar screen?

It may sound too good to be true, because growth investors and income investors don’t usually see eye to eye. Income seekers want the security of 5%-plus annual dividend yields, while growth hounds think that cash should be reinvested back into the business– because a solid earnings report can send a stock up more than 5% in one day.

We’re here to tell you it’s possible to have the best of both investing worlds, and my colleague Brett Owens can show you how, with his simple (and safe) way to earn 12% a year from stocks with “hidden yields”.

At that rate, your money will double every six years, plus you can triple the retirement income that most dividend aristocrats or “safe” fixed income investments currently offer.

How do we accomplish this? Brett has discovered a key relationship between dividends and price gains that allow investors to find both growth and income in “hidden yields”.

Companies that consistently grow their dividends over time tend to outperform. The trick is the best dividend stocks almost never show high yields, because stock gains tends to track the size of dividend increases. If a company increases its dividend by 10% and the higher yield brings new buyers in, it often will send the price up and the yield back down toward where it started.

The hard part is finding the right investments to begin with and Brett has created a list of 7 stocks that offer such “hidden yields.” These companies provide a solid dividend today, with the potential to keep growing that payout over the next several years. It’s easy to fixate on a stock’s dividend history or its current yield, but the real value lies in how much that payout can grow in the future.

What starts out as a 2%, 3% or 4% yield today grows each time a company raises its dividends. You could easily end up earning 10% or even 20% a year just from rising dividends … because your original amount of invested money never changes!

Click here and we’ll show you Brett’s simple three-step process how to earn 12% every year with these 7 “hidden yields” stocks.