News Analysis date published New: 
Thursday, January 31, 2013 - 10:00
New Date created: 
Monday, February 11, 2013 - 14:59
New Date last updated: 
Thursday, January 31, 2013 - 10:00

Shares of CCJ Now Oversold

Thursday, January 31, 2013 - 10:00am

Around the StreetAuthority office, we like to call them "Retirement Savings Stocks."

That's because they can hand you a second income to supplement what you are already earning.

And by investing in companies like these, you put yourself above other investors when it comes to beating the market.

Just consider this...

From 1972 through 2011, U.S.-based dividend stocks in the S&P 500 returned 7.1% annually, far exceeding the 1.5% return for nondividend payers.

When picking stocks to add to my High-Yield Investing portfolio, these are some of the criteria I look at when evaluating an income investment:

1. Long track record of paying consistent and rising dividends

2. Matching history of improving earnings

3. Strong cash flow sufficient to pay dividends and then some

4. High projected growth that can lead to dividend increases

5. Zero or little debt, because debt-free companies have more cash to distribute

6. Noncyclical business models that can profit in all markets and at all times

If any security meets the high-yield/low-risk mandate of High-Yield Investing, then it's Enterprise Products Partners LP (NYSE: EPD).

Enterprise is the largest publicly-traded energy partnership in the United States. It operates more than 50,000 miles of pipelines, enough to circle Earth twice.

These pipelines are connected to about 95% of the country's refining capacity east of the Rockies.

The partnership is a dominant player in the rapidly-growing natural gas liquids (NGLs) market, which contributed 57% of profits in 2011.

My colleague, Paul Tracy, also named Enterprise Products a Top-10 Stock for 2013... Partly because of the oil and natural gas drilling boom in the U.S., and because of its exceptional dividend track record.

In the past year, Enterprise Products has paid more than $2 billion in distributions. And since going public in 1998, the partnership has increased its distribution 43 times. In fact, the company has increased its dividend every quarter since 2004, or 34 straight dividend hikes.

Enterprise receives a fixed fee, based on how much product runs through its pipeline, ensuring steady cash flow regardless of commodity prices.

I added Enterprise to my High-Yield Investing portfolio in February 2007. Since then, I've received $12.88 per share in distributions, and the stock has appreciated more than 75% for a total return of close to 120%.

Despite paying an ever-increasing dividend, Enterprise Products has been able to manage some major projects to ensure it keeps growing. In the first nine months of 2012, it spent $1.7 billion on new projects. In 2013, it plans an additional $2.4 billion of capital projects.

In total, some $7.9 billion of projects are under construction and scheduled to be completed during the next year and a half.

These projects position the company to benefit from the expected growth in natural gas, NGL and crude oil from shale plays.

Risks to Consider: Exposure to volatile natural gas and NGL prices can affect revenue and distributable cash flow. But I think the company is pretty well shielded from these concerns.

Action to Take --> Enterprise Products offers income investors a rising income stream and steady price appreciation. Not to mention, as a prime Retirement Savings Stock, it should be on every investor's watch list.

P.S. -- Interested in more "Retirement Saving Stocks"? Then make sure and checkout StreetAuthority's latest report, "The 10 Best Retirement Savings Stocks." Not only do these 10 stocks pay up to 15% dividend yields, some of our subscribers are using them to earn $30,000 in extra income each year. For more information about these stocks, follow this link now.

Carla Pasternak 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.