Some Pipeline Stocks Boast Top Dividends

The Income Investor by Patrick Cain of Investor's Business Daily has a screen of high quality stocks with high dividend yields. Some Pipeline Stocks Boast Top Dividends

Much like growth investors often find stocks in the technology sector, income investors find companies with high dividends yields in the oil and gas transportation and pipeline industry.

In a screen IBD created to find high-quality stocks with strong dividends, 13 companies appeared.

Of those, four came from the industry, which ranked No. 65 of 197 industry groups in Thursday's IBD. Two weeks ago, this group was ranked 101st.

One reason this industry has so many dividend-rich companies is that many of its companies are master limited partnerships. An MLP, by contract, is forced to give back to investors much of its profits. That translates to strong dividends.

One of the strongest in this class is El Paso Pipeline Partners (EPB). The company transports natural gas, which has been steadily rising in price. The Houston-based firm is also one of the handful of sector leaders highlighted with a box in the IBD Research Tables.

El Paso Pipeline pays shareholders a 5.2% annual dividend yield. Shares are at an all-time high, and its fundamentals are stellar. In the most recent quarter, the MLP saw earnings grow 32% and sales 23%.

Fellow Houston-based pipeline company Enbridge Energy Partners (EEP) owns 1,900-miles of the U.S. portion of the world's longest liquid petroleum pipeline. With its Canadian assets, it has about 3,500 miles of pipeline in North America. Its dividend yield is 7.9%. Enbridge's earnings and sales grew in its latest quarter for the first time since the June 2008-ended period.

Kinder Morgan (KMP) has a dividend that yields 6.8% a year. This pipeline MLP has been finding support at its 40-week line as it works on a base. Enterprise Products Partners (EPD) was the fourth MLP making the screen. Its annualized dividend yield is 6.7%.

Disclosure: The Div Guy owns shares of KMP at the time of this post.