A Top 5 Income Stock for 2012

Just a few weeks ago, we released our newest piece of research — “The Top 5 Income Stocks for 2012.”

These five high-yield stocks represent our favorite income ideas for the new year, and they pay dividend yields of 7.0%… 8.8%… even 11.5%.

But I want to tell you about one of these investments in particular…

For years now we’ve seen the market rise one day, only to fall the next. Meanwhile, events considered to be “once in a generation” — credit crises, sovereign debt downgrades and bailouts — are now happening with surprising frequency.

In short, the market volatility has been unprecedented. But it doesn’t take a doctorate degree to notice that. What’s surprising, however, is how many dividend payers have not only held up in this environment… but have prospered. (I first told you about this phenomenon a couple of weeks ago.)

This includes one of our finds — Stock No. 4 of our “Top 5 Income Stocks for 2012.” This stock has simply ignored the turmoil.

I doubt you even know this company exists, despite it being vital to your day-to-day life. It owns pipelines, terminals and storage facilities throughout the United States. These infrastructure assets ship and store gasoline, diesel, crude oil and jet fuel. More important, the company has a monopoly on these assets — no one can simply come and build another pipeline to compete. This means its business is as steady as it gets.

In return for moving and storing these products, this company earns steady fees… that it then passes on to investors. Since going public in 2001, this company hasn’t missed a dividend, and it has increased the payment more than 35 times.

And if you’re worried about the ups and downs of the broader market, then I don’t know if it gets much better than this stock — Magellan Midstream Partners (NYSE: MMP). Year after year it has delivered steady gains:

Keep in mind this chart shows just MMP’s share price. As I said, the company also pays a solid dividend. Right now the yield is about 5.0% based on quarterly distributions of $0.80 per share. In total, over the past decade MMP has returned 530% — an annualized gain of 20%. For comparison, the S&P 500 is up just 3% annually.

Of course, with investing there’s never a surefire thing. There’s no quality a company can possess that will guarantee its success going forward.

Action to Take  — > But Magellan obviously has a history of beating the market year after year without wild swings. Moreover, the partnership has $575 million in expansion projects underway to improve and expand its pipeline network. So with a steadily growing business, solid dividend and commitment to returning cash to investors, we believe 2012 is likely to register as another market-beating year for MMP.