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Wednesday, December 4, 2013 - 11:30

36 Straight Dividend Raises Since 2004... And Counting

Wednesday, December 4, 2013 - 11:30am

I received this message in my inbox recently. It brings up a good point and captures what I imagine a lot of my readers have in their minds...

"We own gobs of stocks in High-Yield Investing. Instead of having more and more new additions, would you consider adding to an existing holding?" - Lloyd F.

When you cover several exciting new investment ideas month after month, it doesn't take very long to build a large collection of stocks and bonds.

The current High-Yield Investing portfolio is diverse, but manageable. I keep close daily tabs on all of our holdings. Still, I wanted to accommodate Lloyd's request in today's essay -- not because there is a shortage of new candidates, but because this is an opportune time to revisit an old favorite. And it remains a stellar dividend payer to this day...

As they say, sometimes your best new investment idea is a stock you already own. And subscribers who have joined within the past couple of years might be unfamiliar with this particular story.

This company's progress in recent years has been nothing short of amazing. I could tell you all about it, but I'd rather show you. The chart below is simple, yet speaks volumes.

It's not hard to spot the trend here. The firm has lifted its dividends nearly 40 times since going public in 1998. Even more impressive, the company has boosted its dividend for 36 consecutive quarters since 2004, causing distributions to nearly double, to $0.69 per share from $0.37.

Without looking at anything else, this steady advance should tell you plenty about the company's current financial health. But to confirm the upbeat prognosis, consider the improvements in its top line and bottom line over the past 10 years.

As you can see, the dividend chart above is underpinned by some rock-solid financial results. It's not hard to see why distributions have been ratcheting higher each quarter. Every bump in the payout has been accompanied by a corresponding increase in the bottom line.

In fact, underlying profits have been marching even faster. So the payout ratio is lower now than it was when this streak first started. The latest dividend of $0.69 per share represents 96% of adjusted earnings. Back in 2003, the company was distributing about 381% of every dollar earned.

So even after lifting its payments from $0.37 to $0.69 per share, the company is paying out less of its profits now than it was 10 or even five years ago. That means today's dividend obligations are better supported -- which is probably why management just authorized a 39th increase just a few months ago.

Not only is the payout higher than it was at the time when we first recommended it in High-Yield Investing in 2007, but valuations are cheaper too. The stock carries a forward price-to-earnings ratio (P/E) of multiple of 22.2 -- versus a multiple of 33.4 for the industry average according to Morningstar.com.

All of which is to say that if you haven't considered Enterprise Products Partners (NYSE: EPD) yet, now is the time to take a closer look.

Enterprise Products' latest dividend hike last month doesn't exactly come as a surprise. After all, the pipeline owner had raised its payout the previous 38 quarters in a row. Still, we can now officially extend the streak to 39 and counting.

This latest increase lifts the annualized distribution to $2.76 per unit, bumping the yield to 4.4%.

Now, I know a 4.4% yield might not get some yield-hungry investors excited, but I don't think we've seen the last of the dividend hikes for Enterprise Products. The company operates a growing portfolio of strategically-located, rent-earning midstream assets. And unlike most other MLPs, it doesn't have to share its cash with a general partner.

The company put $3 billion in new projects into operation last year and plans to invest twice that much in new initiatives that will enter service over the next few years. Keep in mind, this is already the nation's largest and most powerful midstream player, with irreplaceable assets capturing income from every link in the energy chain.

With accelerating cash flows propelling distributions ever higher, I am reaffirming my "Top Pick" status on EPD in my High-Yield Investing portfolio.

P.S. EPD provides High-Yield Investing subscribers impressive income growth, but there's another investment that has rewarded patient investors even more -- some have even seen gains of 380% in the past 10 years. In fact, many of America's privileged elite have been cashing in on this wealth secret for decades. But you don't need to be rich to take advantage of it. To learn more about this wealth secret, and how to use it yourself, click here.

Nathan Slaughter does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC owns shares of EPD in one or more of its “real money” portfolios.