A Near-Perfect 7% Yield

Wealthy Retirement View in browser Brought to you by The Oxford Club Wednesday, April 1, 2015 Saudi "Oil Weapon" Targeting America? America's oil resurgence put a serious dent in OPEC's profit margins... Now, led by Saudi Arabia's new king and armed with a new "oil weapon," will OPEC strike back against America? View Saudi Arabia's plan in complete detail, right here. The Safety Net: A Near-Perfect 7% Yield Marc Lichtenfeld, Chief Income Strategist, The Oxford Club One of the more popular master limited partnerships (MLPs) is Energy Transfer Partners (NYSE: ETP). The company has about 33,000 miles of natural gas pipeline. The attractive feature of the pipeline business is that it's not dependent on the price of oil or gas. Rather, its business relies on the volume of product being shipped through its pipelines. The more gas that gets transported, the more money Energy Transfer Partners makes and returns to shareholders. The stock pays a 7.1% yield. And it has an interesting track record. It has paid a dividend for nearly 17 years - or 66 quarters. Of those 66 quarters, it has raised the dividend in exactly half of them. The dividend was cut once. In May 2008, the MLP slashed its quarterly distribution from $1.125 to $0.869. The next quarter, that amount was inched higher, to $0.894, where it stayed for the next five years. Then, in October 2013, the company started lifting the dividend again. Since then, the dividend has gone up every quarter. It now stands at $0.995 per quarter - or $3.98 annually. Plenty of Cash Flow When I examine a company to see whether the dividend is sustainable, I look at cash flow. Generally speaking, I want to see a company pay shareholders 75% or less of its free cash flow. However, MLPs are different. Because their goal is typically to pay out as much of their cash flow as possible to shareholders, the 75% payout ratio doesn't apply. As long as the company isn't paying out more than 100% of its distributable cash flow (a measure of cash flow for MLPs), I'm usually fine with it. "Hyper-Fi" Revenues Set to SKYROCKET Wi-Fi bandwidth is running out. Nobody's talking about this... but experts predict that our wireless traffic will soon leave us 2,800% over the network's capacity. That's a critical overload. That's where the next step in Wi-Fi's evolution comes in. It's a technological miracle. And it will completely revolutionize the $1.5 trillion market - very soon. You have mere days before the company with a monopoly on this technology blasts off. Get the details here. Last year, Energy Transfer Partners generated $2.6 billion in distributable cash flow (DCF). It paid out less than $2.1 billion in distributions for a coverage ratio (the ratio of DCF to distributions) of 1.27. In other words, the company generated 27% more free cash flow than it paid to shareholders. That's up from 1.03 - or 3% surplus - the previous year. Analysts forecast DCF to be $4.55 per share this year and $4.65 in 2016. If Energy Transfer Partners comes in anywhere close to the analysts' projection, it should have no problem raising the dividend for the foreseeable future. Because the company did cut the dividend during the financial crisis, it doesn't have a perfect track record and I can't give it a perfect rating. Despite that blip in 2008, I'm not overly worried about Energy Transfer Partners' ability to pay the dividend. In fact, I expect the company to continue raising it. Dividend Safety Rating: B If you have a stock whose dividend safety you'd like me to analyze, leave the ticker symbol using the comment link below. You can also search the Wealthy Retirement site to see if I've written about your company lately. Just type in the company's name in the search box at the top of the page. Good investing, Marc Click here to post a comment on WealthyRetirement.com "The Demise of Silicon (It Starts Today) A group of maverick scientists has "accidentally" discovered an odd substance that overturns centuries-old limits of engineering. It carries electricity faster than any other substance on earth... up to a hundred times speedier than silicon! Our research shows it could revolutionize a $357 billion consumer electronics market... and push one company's $9 stock through the roof. Full report here. Recent Articles From Wealthy Retirement Two-Minute Retirement Solution: Budgeting for the Unpredictable by Steve McDonald Tuesday, March 31, 2015 There are two kinds of costs in retirement when it comes to healthcare. One is easy to prepare for. The other is almost entirely unpredictable. Over the next two minutes, Steve McDonald reveals what these costs are and how you can best budget for both. Read On... 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