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10 High Yield Energy Companies Increasing Their Dividends

As earnings season takes focus on the stock market, many energy companies are increasing their dividends.  While some of these energy plays are Bullish and others are Bearish, they are all playing the dividend growth game with investors.  Here are 10 energy stocks increasing their payouts in the past week.

El Paso Pipeline Partners, L.P. (EPB) increased its quarterly cash distribution per common unit to $0.55 ($2.20 annualized) payable on Aug. 14, 2012, to unitholders of record as of July 31, 2012. This represents a 15 percent increase over the second quarter 2011 cash distribution per unit of $0.48 ($1.92 annualized) and an 8 percent increase from $0.51 per unit ($2.04 annualized) for the first quarter of 2012. EPB has increased its cash distribution 17 consecutive quarters since its initial public offering in November 2007.

Bottom line: EPB has a current dividend yield of 6.23%.  It has an equity summary score of 7.8 out of 10 for a Bullish outlook.

Enterprise Products Partners L.P. (EPD) announced that the board of directors of its general partner declared an increase in the quarterly cash distribution rate paid to partners to $0.6350 per common unit, or $2.54 per unit on an annualized basis.  The quarterly distribution will be paid on Wednesday, August 8, 2012, to unitholders of record as of close of business on Tuesday, July 31, 2012. This distribution rate, which represents a 5 percent increase over the $0.6050 per unit distribution rate declared with respect to the second quarter of 2011, is the 41st distribution increase since Enterprise’s initial public offering in 1998 and the 32nd consecutive quarterly increase.

Bottom line: EPD has a current dividend yield of 4.65%.  It has an equity summary score of 7.1 out of 10 for a Bullish outlook.

Kinder Morgan Energy Partners, L.P. (KMP) ) today increased its quarterly cash distribution per common unit to $1.23 ($4.92 annualized) payable on Aug. 14, 2012, to unitholders of record as of July 31, 2012. This represents a 7 percent increase over the second quarter 2011 cash distribution per unit of $1.15 ($4.60 annualized) and is up from $1.20 per unit ($4.80 annualized) for the first quarter of 2012. KMP has increased the distribution 44 times since current management took over in February 1997.

Bottom line: KMP has a current dividend yield of 5.75%.  It has an equity summary score of 6.3 out of 10 for a Neutral outlook.

Western Gas Partners, LP (WES) announced that the board of directors of its general partner has declared a cash distribution of $0.48 per unit for the second quarter of 2012, representing a 4-percent increase over the prior quarter and a 19-percent increase over the second quarter of 2011. The distribution is payable on August 13, 2012, to unitholders of record at the close of business on July 31, 2012.

Bottom line: WES has a current dividend yield of 4.22%.  It has an equity summary score of 6.0 out of 10 for a Neutral outlook.

Targa Resources Partners LP (NGLS) announced today that the board of directors of its general partner has declared a quarterly cash distribution of 64.25¢ per common unit, or $2.57 per common unit on an annualized basis, for the second quarter 2012. The approved distribution represents an increase of approximately 3% over the previous quarter’s distribution and 13% over the distribution for the second quarter 2011. This cash distribution will be paid August 14, 2012 on all outstanding common units to holders of record as of the close of business on July 23, 2012.

Bottom line: NGLS has a current dividend yield of 6.76%.  It has an equity summary score of 5.4 out of 10 for a Neutral outlook.

Williams Company (WMB) also revised its outlook for FY13 downward, projecting EPS of $1.38, down from the prior guidance of $1.55, and below the consensus of $1.60.   WMB continues to expect to pay a full-year 2012 shareholder dividend of $1.20 per share, a 55% increase over 2011. The company confirmed it expects the full-year dividend it pays shareholders in each 2013 and 2014 to increase by 20% to $1.44 and $1.75 per share, respectively.

Bottom line: WMB has a current dividend yield of 3.99%.  It has an equity summary score of 4.8 out of 10 for a Neutral outlook.

Targa Resources Corp. (TRGP) announced today that its board of directors has declared a quarterly cash dividend of 39.375¢ per share, or $1.575 per common share on an annualized basis, for the second quarter 2012. The approved dividend represents increases of approximately 8% over the previous quarter’s dividend and 36% over the dividend for the second quarter 2011. This cash dividend will be paid August 15, 2012 on all outstanding common shares to holders of record as of the close of business on July 23, 2012.

Bottom line: TRGP has a current dividend yield of 3.51%.  It has an equity summary score of 3.6 out of 10 for a Neutral outlook.

Kinder Morgan, Inc. (KMI) reported second quarter cash available to pay dividends of $307 million, up 83 percent from $168 million for the comparable 2011 period. Through the first six months, KMI reported cash available to pay dividends of $610 million, 40 percent higher than $435 million for the first half of 2011. KMI is expected to finish the year significantly ahead of its published annual budget due to its recent acquisition of El Paso Corporation.  The board of directors increased the quarterly cash dividend to $0.35 per share ($1.40 annualized), which is payable on Aug.15, 2012, to shareholders of record as of July 31, 2012. This represents a 17 percent increase over the second quarter 2011 cash distribution per unit of $0.30 ($1.20 annualized) and is up 9 percent from the first quarter 2012 dividend of $0.32 ($1.28 annualized) per share.

Bottom line: KMI has a current dividend yield of 4.0%.  It has an equity summary score of 2.0 out of 10 for a Bearish outlook.

Williams Partners L.P. (WPZ) announced that the regular quarterly cash distribution its unitholders receive has been increased to $0.7925 per unit.  The board of directors of the partnership’s general partner has approved the quarterly cash distribution, which is payable on Aug. 10, 2012, to unitholders of record at the close of business on Aug. 3.  The new per-unit amount is an 8.2-percent increase over the partnership’s distribution of$0.7325 per unit that was paid in August 2011. It is also a 2-percent increase over the partnership’s first-quarter 2012 distribution of $0.7775 per unit.

Bottom line: WPZ has a current dividend yield of 5.63%.  It has an equity summary score of 2.0 out of 10 for a Bearish outlook.

Spectra Energy Partners, LP (SEP) announced that the board of directors of its general partner declared a quarterly cash distribution to unitholders of $0.485 per unit, an increase of one-half cent over the previous level of $0.48per unit. This is the 19th consecutive quarter that Spectra Energy Partners has increased its quarterly cash distribution. The cash distribution is payable on August 14, 2012, to unitholders of record at the close of business on August 3, 2012. This quarterly cash distribution equates to $1.94 per unit on an annual basis.

Bottom line: SEP has a current dividend yield of 6.01%.  It has an equity summary score of 1.5 out of 10 for a Bearish outlook.

Calendar Spread on Kinder Morgan (KMP)

STRATEGY DISCUSSION: Kinder Morgan (NYSE: KMP) ended the last trading session at $76.34. So far the stock has hit a 52-week low of $63.42 and 52-week high of $78.00. KMP has had an S&P 5 STARS (out of 5) ranking since 8/23/2007.  On 4/21/2011 S&P equity analysts set a 12-Month price target of $88.00 for the stock. Kinder Morgan stock has been showing support around $75.18 and resistance in the $76.98 range. KMP is part of the S&P 5 STARS stock list.  A way to play this stock would be with a calendar spread that substitutes a longer term call option in place of the covered call stock purchase. To use this strategy consider going long the KMP Jan ’13 67.50 Call and selling the Jan ’12 75 call for a $6.00 debit. The strategy has an 82 day life and would provide 3.72% downside protection and a 25.00% assigned return rate for an 111.28% annualized return rate (for comparison purposes only). This strategy has a 3 Key (out of 5) Moderate Relative Risk ranking.  Kinder Morgan has a current annual dividend yield of 5.91%.

TRADE: A CALENDAR SPREAD that involves selling the January ’12 75 call and buying the January ’13 67.50 call should cost $66.89 less per share than the covered call and potentially yield a 25% return if the stock stays above $75 through expiration.  S&P set a $88.00 12-Month price target for KMP which is currently trading at $11.66 below that target.  With the calendar spread trade, the trade cost could be reduced and returns potentially improved if the stock stays above $73.55 but lower than $95.43.

RISK: The Calendar spread strategy will normally carry more risk than a covered call strategy, but the rate of return is generally higher, since there is a lower capital outlay. At a 3 Key risk ranking this strategy is considered to have moderate relative risk. If the stock price at expiration is below $75 this strategy will not generate the potential returns shown. Another risk for this strategy is related to the bought Call Option price.  If the stock drops in price between now and expiration date, there is a possibility that the Jan ’13 67.50 call could drop quickly.

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