3 Stocks that pay you to own them — the motley fool 1 unit electricity cost in andhra pradesh


Magellan Midstream Partners’ current yield of about 5.5% is juicy, but it comes with the territory. Magellan is an energy master limited partnership, or MLP, and in exchange for favorable tax treatment, MLPs are required to pay out almost all their net earnings in the form of distributions to their unitholders. Investors can reap big gains by buying and holding MLPs.

However, there are a couple of trade-offs. Because of that special tax treatment, MLP investors have a few extra hoops to jump through come tax time, which can be burdensome. But the payouts can certainly be worth the extra red tape, and Magellan’s payouts have been growing for a long time. In fact, the company has increased its distribution nearly every quarter since going public in 2001 — with the only exceptions during the 2009 financial crisis.

Better yet for investors, Magellan’s unit price — MLP-speak for share price — is up about 18% over the past five years, in spite of recent turbulence in energy markets. Other MLPs haven’t fared so well, but Magellan’s conservative management style and top-notch balance sheet have helped keep the company running smoothly.

Although Magellan is a company you may never have heard of, you’ve definitely heard of the next company on the list, oil major Royal Dutch Shell. Besides being a filling station icon, Shell is also one of the largest companies in the world, and it’s taking steps to ensure it stays that way.

In 2017, Shell divested a number of underperforming assets, with a goal of dropping some $30 billion in assets by the end of 2018 to improve its margins even further. Meanwhile, it has expanded its liquefied natural gas business, a market it expects will grow even faster than oil in coming years. That should help keep the company strong even if the oil market softens five or ten years down the road.

The oil market is currently showing no signs of softening. Brent Crude prices — which have stayed above $60 per barrel all year — are currently sitting around $74 per barrel. Thanks to the stringent cost-cutting Shell did during the oil price downturn, the company’s most recent first quarter 2018 was an earnings bonanza, with net income up 67% year over year, to $5.9 billion.

Dividend yields above 5% are good, but a yield above 12% sounds positively amazing! That is, if the yield looks sustainable. And luckily for investors in another energy MLP, Energy Transfer Partners, that company’s current 12.4% yield is looking pretty stable right now.

That wasn’t always the case, though. Throughout much of 2017, the company’s distribution coverage — the amount of cash it churned out compared to the amount it needs to pay its distribution — was razor thin. But then, Energy Transfer Partners reported a distribution coverage ratio of 1.3 times in its fourth-quarter 2017 earnings report: a very comfortable margin.

Another issue facing Energy Transfer Partners was a highly leveraged balance sheet, which isn’t unusual for an energy infrastructure MLP. Luckily, the partnership was able to convert some of its more expensive debt into less expensive debt, as well as pay down some debt altogether through asset sales. Finally, it’s contemplating a big change to its management structure to accelerate growth.

A dividend is about more than just getting a check every quarter. Historically, dividend-paying stocks have tended to outperform non-dividend-paying stocks over the long term. But all dividends are not created equal. Yields vary, and reliability and dividend history are important to make sure the dividend isn’t yanked away from you.

Dividends are a cash return on your investment in a stock — effectively, companies are paying you to own their shares. Since you own part of the companies in which you are investing, and thus have a right to a portion of the earnings, it only makes sense that you should expect a piece of the action via a dividend payment. Here are three companies that take returning cash to shareholders very seriously, and that also have sizable yields: ExxonMobil Corporation ( NYSE:XOM), Duke Energy Corporation ( NYSE:DUK), and W.P. Carey Inc. ( NYSE:WPC). 1. An integrated oil giant

ExxonMobil has a yield of 4.2%. It has increased its dividend every year for 36 consecutive years, an impressive feat given that the company operates in the highly cyclical energy industry. Over the trailing 10 years, the average annual dividend increase was 8%. The most recent hike, which was announced in April, was roughly 6.5%. Although lower than the 10-year average, that’s still roughly double the 3% historical rate of inflation.

Exxon’s yield today is toward the high end of its historical range, a function of the mid-2014 energy downturn and concerns that the diversified oil and natural gas giant has fallen behind peers now that oil prices are picking up again. There’s some truth to those fears, given that Exxon’s production has fallen for a couple of years and its return on capital employed rate has gone from leading the pack to simply middle of the pack.

However, Exxon has plans in the works that should help reverse these trends. For example, it is ramping up production in the onshore U.S. market, drilling offshore in Guyana and Brazil, and investing in natural gas production in Mozambique. To improve returns, meanwhile, Exxon is planning to take control of more of its investments so it can benefit from its expertise in running large projects. This oil major is a giant ship, however, so it will take time to turn things around. While other investors are being impatient, you can get paid to wait for Exxon to get things moving in the right direction again. 2. A boring old power play

Duke Energy is one of the largest electric and natural gas utilities in the United States. It yields around 4.5% and has increased its dividend every year for 13 consecutive years. The average dividend increase over the trailing 10 years was roughly 3%, right in line with inflation. However, after something of a corporate makeover that jettisoned non-regulated assets and added natural gas to the picture, Duke is targeting 4% to 6% dividend growth through 2022.

With a largely regulated business, Duke has to get the rates it charges customers approved by the government. It does this by spending money to upgrade and expand its business. The current plan calls for $37 billion worth of spending across its business (roughly 90% going toward its regulated electric assets, 8% into its natural gas businesses, and the rest to renewable power) between 2017 and 2021. That should provide ample support for the utility’s growth targets.

One of the biggest allures of Duke Energy‘s stock, however, is its incredibly low beta of 0.1, a measure of relative volatility. This suggests that Duke’s stock is around 90% less volatile than the broader market. This power company won’t excite you, but it can provide a solid high-yielding cornerstone to a broader dividend portfolio.

W.P. Carey is a net lease real estate investment trust (REIT). This means that it owns property that it rents out to others, but the lessees pay for most of the operating costs of the assets, including things like taxes and property maintenance. Carey’s yield is 6.6% and its dividend has been increased every year for 21 consecutive years. The average annual increase over the past decade was around 8%. Carey has a long history of increasing the dividend every quarter, with the first-quarter dividend up around 2% over the same quarter last year. That’s a modest hike, but there’s a catalyst to watch.

Carey, a publicly traded REIT, manages non-traded REITs, one of which is nearing the end of its life. It’s highly likely that Carey will try to buy that non-traded REIT (CPA-17), which will increase the size of its portfolio and should lead to a more sizable dividend increase. (At least that’s what happened when Carey bought CPA-16.) In other words, there’s a very real catalyst for higher dividends.