This 10.9% Dividend Yield Stock Shouldn’t Be Ignored
Have you tried to trade the markets in order to make a quick profit, and the result was the opposite of the expected return?
If so, it should come as no surprise that it’s a high-risk/high-reward investment strategy. But today we’ll look instead at an investment strategy that earns a high return with low risk. It expects nothing from the investor but patience, since more time spent in the market comes with more rewards.
The method I am referring to is the ownership of high-quality stocks that yield an equally high dividend. These businesses have a steady and reliable revenue source and pay out a large portion of revenue via a dividend.
One company to which this would apply is Summit Midstream Partners LP (NYSE:SMLP), a developer, owner, and operator of midstream energy infrastructure assets. Said assets are only located in the U.S., in such states as Texas, Ohio, Colorado, and North Dakota.
Now you may think that, being an energy company, SMLP stock carries a lot of risk. However, the company operates on the steadier side of the industry, with predictable-but-growing income regardless of the market conditions. For instance, one of its revenue streams involves gathering, treating, and processing services in the natural gas sector, performed through long-term contracts.
If you need evidence of the above, the past reported sales speak for themselves. In 2012, Summit’s total revenue was $165.7 million, growing to $402.8 million five years later, with no negative returns in between. (Source: “Summit Midstream Partners L.P.,” MarketWatch, last accessed September 7, 2017.)
Get Rewarded for Your Time
The steady revenue is why Summit can pay a dividend on a quarterly basis. The current dividend is $0.575 per share, for a total annual payment of $2.30.
Don Barrett/Flickr
The high yield is reflected in the 10.9% being paid out, based on the current trading price of $21.15. The company’s yield is above that of the average yield of 1.9% on the S&P 500 Index. Simply put, ownership of SMLP stock could provide more than five times the return being received through another dividend income source.
To make things more interesting, SMLP stock is also notable for its dividend growth, with nine increases since 2013–a streak which could continue, given the steady nature of the revenue. What’s more, the earnings are protected from inflation, so revenue should always grow as time passes.
An additional benefit is that, as more time is spent holding shares of a stock with a growing dividend, a higher personal dividend yield, based on the average cost of the shares, should be earned. This, in turn, means a faster return of capital.
Final Thoughts About SMLP Stock
No matter what your goals are, whether it’s reinvesting income into growing your portfolio or earning a steady income, SMLP stock should satisfy this need. Especially in the current low-interest environment, there are not many choices that result in earning a high and reliable income.
Also Read:
MLP Stock List: Earn Reliable Income from These Energy Partnerships
The Best Pipeline Stocks for Retirement Income