Big Dividends From American Oil, My Tesla Hedge

Many of my articles on Tesla (TSLA) on Seeking Alpha have some commenters that fall into one of these camps:

  1. Not convinced that Global Warming is occurring
  2. Not convinced that Global Warming is harmful
  3. Not convinced that humans are responsible
  4. Convinced that Electric Vehicles are dirtier than gas vehicles

This article is for all of them and for everyone else who would like to enjoy great dividends from American companies producing local American oil and natural gas. All the companies on this list are reasonably well covered at Seeking Alpha and with this article I hope to help you in finding high dividends from American oil producers.

American Oil Production

It surprises many when presented with the fact that America is the top oil producer in the world in 2013. Here is available data for 2013 from the EIA in Thousand Barrels/day.

The US has also been growing its production steadily.

At the same time imports are falling (graph is in thousand barrels).

America also leads the world in natural gas production. This is where things get interesting for investors. There is an American Oil and Natural Gas boom and there is ample opportunity for great dividends because a lot of the oil and gas production and transport companies are structured as Master Limited Partnerships – MLPs.

Currently many upstream (and to a smaller extent, pipeline) MLPs are trading at below normal values thanks to attacks by an analyst firm called HedgeEye on several large MLPs such as Linn Energy (LINE) and Kinder Morgan (KMP).

Thanks to the ongoing negativity, both those form my two favorite picks. If you are not a fan of K1s at tax time both the companies have alternative options: Kinder Morgan Management (KMR) and Linn Co. (LNCO).

I won’t go into much more detail here because both Linn and Kinder Morgan are heavily covered stocks. But I’ll say this much that in spite of the bad environment, Linn has managed two major acquisitions and a dividend increase is imminent. This has driven the stock back up into the 30’s but there is still room to grow. I believe that any dividend increase will push the stock back up to levels before the Hedgeeye attacks.

Here are the top 5 upstream MLPs in size and their dividends. Linn Energy is almost as big as the rest of them combined so before you invest, note that most of these are small companies.

Dividend % (As of 1/16)
Linn Energy 9.5
Breitburn (BBEP) 9.7
Vanguard (VNR) 8.3
EV Energy (EVEP) 9.1
Legacy (LGCY) 8.4

From the list it is easy to see that spectacular dividends are not hard to find from American Oil. Here are the total returns for them in the last 5 years.

LINE Total Return Price Chart

Every single one of them outperformed the S&P 500, which had total return 134% measured using SPY (SPY) over the last 5 years.

Conclusion

While my wife and me do a majority of our driving in an EV, are planning on getting solar panels and also invest in green energy companies, I treat our oil and gas investments – great dividends from the American oil and gas boom – as our hedge to green energy.

Disclosure: Long TSLA, KMP, LINE, LNCO, SPY

The Real Dividend Stocks and How to Find Them

This article also appeared at The Motley Fool.

I’m always on the hunt for good dividend payers so I try and read articles and posts on good dividend paying stocks mostly to come away disappointed with stocks paying 2% – 4% dividends. That is not good. Doesn’t matter if the dividend is growing or has been growing forever, a current yield of 2% or 3% is not what I would consider a good dividend stock.

Dividend stock lists often contain stocks like McDonald’s (3.5%), Wal-Mart (2.3%) and Pepsi (3.1%). All of them pay growing dividends and have paid dividends for a long time. Good stable companies whose dividend is not likely to reduce. But in my mind these are not “dividend” stocks. That’s like savings accounts calling 0.25% high yield.

I want yields of more than 4%, preferably more than 6% and the expectations of growing dividends. And it turns out that this is not a difficult problem at all. I simply needed more research. And here it is.

Let me start with my favorite dividend stock – Kinder Morgan. You have two options investing in Kinder Morgan — KMP (NYSE: KMP) and KMR (NYSE: KMR). They pay a dividend of 6% and 6.3%, respectively. KMP pays dividends in cash and KMR pays dividends in stock. KMP is a partnership and you have to deal with K1s at tax time, while KMR is like a regular stock. Both of these dividends are tax free until you actually sell the stock. Kinder Morgan is an MLP (Master Limited Partnership — a publicly traded partnership that is generally used by oil and gas pipeline companies) and there are several other MLPs that also pay good dividends. The industry as a whole is a good place to look for dividend payers.

Another good dividend paying stock is Verizon (NYSE: VZ) (4.8% dividend). Personally I prefer Verizon over AT&T (5.3% dividend) because as of now Verizon has invested in actually having a better network with more coverage. Also the stock has been performing better.

Another industry that pays good dividends is the Shipping Container Leasing industry. The leaders Textainer Group (NYSE: TGH) and TAL (NYSE: TAL) both pay excellent dividends of 5.6% and 6.8%, respectively.

To find these stocks I went through a stock screener looking for stocks yielding more than a certain percent and then looked up each one to see if the dividends were stable and growing, if the company actually made enough money to cover the dividends, and I’ve avoided companies and funds with complex financial business models that I don’t clearly understand.

Other dividend paying stocks I recommend are:

  • Waste Management – WM (4.2%)
  • Glaxo – GSK (5.3%)
  • B&G Foods – BGS (4.1%)
  • Transmontaigne Partners – TLP (6.7%)
  • Intel – INTC (4.3%)

in addition to the ones already mentioned in the article

  • Kinder Morgan – KMP (6.3%)
  • Verizon- VZ (4.8%)
  • Textainer Group – TGH (5.6%)
  • TAL (6.8%)

That is a good list to start with and you can always find your own gems by using a screener.