Saturday, August 23, 2008

New High Yield Dividend Stock: DCP Midstream Partners LP (DPM)

I was looking through the 52 week stock lows the other day for some ideas for a new stock purchase and came across a couple of natural gas pipeline companies that had come down in price over the past few months. I looked over several other pipeline companies and found that most were down over the past six months, some were down over 40% so far this year.

I currently own the natural gas pipeline company Kinder Morgan Energy Partners which has performed very well for me. I first started purchasing shares of Kinder Morgan Energy Partners (KMP) in October of 2002 and I have been very happy with the long term stock performance as well as the increasing dividend income. KMP is my largest stock holding and I think at the current price the stock is fairly valued. Since I have a large holding in KMP and receive a large quarterly dividend I decided I would look to purchase another pipeline company that may be a better value at this time.

I did some further research using S&P data and I selected DCP Midstream Partners (DPM) as the stock I will purchase with my distributions from KMP. While researching DPM in S&P, I also realized that one of my current holdings Spectra Energy (SE) is an owner of DCP Midstream. SE was spun off from Duke Energy last year and the partnership was named DCP from Duke and ConocoPhillips which originally started the partnership.

DPM is a midstream master limited partnership formed by DCP Midstream to own, operate, acquire and develop a diversified portfolio of complementary midstream assets. DCP Midstream leads the midstream segment as one of the nation's largest natural gas gatherers and processors, the largest natural gas liquids (NGLs) producer and one of the largest NGL marketers in the U.S. DCP Midstream was formed in December 2005 and is a 50-50 joint venture between Spectra Energy and ConocoPhillips.

What I like about DPM
1. DPM continues to have strong earnings growth.
2. DPM has increased quarterly distributions from $.35 to $.60 with increases every quarter since the first payment in May 2006.
3. The majority owners of DPM are Spectra Energy and ConocoPhillips which are well run companies and have very deep pockets.
4. They have several projects nearing completion and in planning stages which will help the company grow organically
5. The dividend yield is over 9%

Disclosure: The Div Guy owns shares of SE and DPM at the time of this post

This article was written by The Div Guy. You may email questions or comments to me at thedivguy@gmail.com.

6 comments:

  1. Plus in last three months insiders have made quite a few purchases !!

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  2. What is causing the stock price to drop so much over the last 1 year?

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  3. or even tesco the supermarket in uk forgot otc symbol begin big push in sw usa believe its a 5% even ed is over 5%

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  4. are the distributions from the Master limited partnerships taxed as dividends? or as regular income?

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  5. MLPs also possess a unique tax advantage in that 80% to 90% of distributions typically are tax-deferred for federal income tax purposes. The distributions are subject to tax only when the units are sold, and if the units are held for more than a year, they are taxed as long-term capital gains (currently 15%) rather than ordinary income (marginal rates as high as 35%), as is the case for corporate bonds.

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