BPL Stock: The Most Overlooked High Dividend Stock Yielding 9.1%
Collect a 9.1% Dividend Yield from BPL Stock
Today’s chart highlights a high-dividend stock that is largely overlooked by income investors.
Usually, when a company has a dividend yield of as high as 9.1%, there could be some concerns about its dividend safety. This is because, if the company is solid, yield-seeking investors would rush to buy it, bidding up its price and lowering its yield.
So, when a stock’s yield stays at an elevated level, it could be a sign of trouble. Today’s high-dividend stock, however, is an exception.
I’m talking about Buckeye Partners, L.P. (NYSE:BPL), a master limited partnership (MLP) headquartered in Houston, Texas.
With a quarterly distribution rate of $1.2625 per common unit, Buckeye is truly a high-dividend stock, with a 9.1% yield.
Compared to the other high-yield stocks, Buckeye is a special one, due to its dividend safety. Since the partnership’s initial public offering (IPO) in 1986, Buckeye has paid a cash distribution every single quarter. Furthermore, the partnership managed to pay, not only a steady dividend, but an increasing one.
The chart below shows BPL stock’s distribution history for the past 10 years:
BPL Stock Distribution History
Source: “Distribution History,” Buckeye Partners, L.P., last accessed August 29, 2017.
As you can see from the chart, Buckeye’s payout has been consistently increasing. As a matter of fact, the partnership has been raising its quarterly distribution rate at least once a year for more than two decades.
Despite its impressive payout history and attractive dividend yield, this high-dividend stock hasn’t really been a hot commodity. The reason is simple: Buckeye operates in the energy sector.
With the downturn in oil and gas prices over the last several years, many energy companies have experienced huge declines in their business. Some have even cut back their dividends. So, it’s no surprise that investors today are having second thoughts about putting their money into the energy sector.
The thing is, though, Buckeye is not drilling new wells. Instead, it provides midstream services.
Buckeye’s history can be tracked all the way back to 1886, when the Buckeye Pipe Line Company was incorporated as a subsidiary of the Standard Oil Company. Today, Buckeye is one of the largest independent pipeline operators in the country. Its midstream asset portfolio consists of approximately 6,000 miles of liquid petroleum product pipelines and more than 120 liquid petroleum product terminals.
Energy companies pay Buckeye a fee for transporting and storing liquid petroleum products. In other words, Buckeye is in the business of operating what are essentially energy toll roads and storage depots.
The fee-based nature of Buckeye’s business means it doesn’t have to worry about commodity prices as much as a company that’s drilling new wells. In fact, approximately 98% of the partnership’s adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) in the first half of this year came from Buckeye’s fee-based operations. (Source: “Citi MLP/Midstream Infrastructure Conference,” Buckeye Partners LP, last accessed August 29, 2017.)
And if you are worried about Buckeye’s dividend safety, note that the partnership generated $361.1 million of distributable cash flow in the first half of 2017, which was more than enough to cover its cash distributions for the period. (Source: “Buckeye Partners, L.P. Reports Second Quarter 2017 Financial Results,” Buckeye Partners LP, August 4, 2017.)
That’s why investors looking for a high-dividend stock should consider this overlooked energy partnership.