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BPL Stock: This 7.9% Yielder Raises Its Payout Every Quarter Income Investors 2017-08-04 07:17:41 top dividend stock high dividend stock Buckeye Partners L.P. Buckeye Partners NYSE:BPL BPL stock Buckeye Partners stock BPL dividend This article highlights Buckeye Partners, L.P. (NYSE:BPL) a top dividend stock that yields 7.9% and is raising its payout every quarter. Buckeye Partners Stock,Dividend Stocks,News

BPL Stock: This 7.9% Yielder Raises Its Payout Every Quarter

Collect a Solid 7.9% Yield from This Top Dividend Stock

Usually, when there’s a top dividend stock coming from the energy sector, investors seem to be underwhelmed. And this is understandable, given what has been happening in the oil and gas industry over the last few years.

In the commodity business, firms cannot set prices. So when commodity prices are low, business is not good. Indeed, since the downturn in oil and gas prices started in the summer of 2014, many energy companies have fallen deep into the doldrums.

So when people see a 7.9% yielder from the energy sector, they may consider its high dividend yield as a sign of trouble.

There are, however, exceptions.

Buckeye Partners, L.P. (NYSE:BPL), for instance, is a high dividend stock whose payouts are more than solid. Just take a look at the chart below.


Source: “Annual Meeting of Limited Partners,” Buckeye Partners LP, last accessed August 2, 2017.

The charts shows Buckeye’s per share distribution for each year from 2013 to 2016, and also for the last 12 months. As you can see, in a period where energy companies were having massive layoffs and dividend cuts, Buckeye managed to increase its payout to investors.

In fact, Buckeye has increased its per-unit distribution rate every year for more than 20 years. The partnership has been paying uninterrupted quarterly dividends since its initial public offering in 1986. (Source: “Distribution History,” Buckeye Partners LP, last accessed August 2, 2017.)

What’s more is that while most dividend growth companies like to brag how they raise their payouts every year, Buckeye has been doing that more frequently. Since 2013, the company has increased its distribution every single quarter.

How can someone in the energy industry deliver such impressive dividend growth?

Well, as it turns out, Buckeye is not drilling new wells. It is not in the business of exploration or extraction of a commodity. Instead, Buckeye provides transportation and storage services.

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In the transportation segment, Buckeye owns and operates approximately 6,000 miles of pipeline. In terms of volume delivered, it is one of the largest independent liquid petroleum products pipeline operators in America.

In the storage segment, the partnership has more than 120 liquid petroleum products terminals. The total storage capacity of those terminals is over 115-million barrels.

Basically, energy companies pay a fee for Buckeye to move or store energy products. A fee-based business adds stability to the partnership’s cash flow. As a matter of fact, approximately 96% of the partnership’s adjusted earnings before interest, tax, depreciation, and amortization (adjusted EBITDA) in the first quarter of 2017 was fee-based.

The following chart further explains why this top dividend stock managed to grow its distributions, despite the commodity price downturn:


Source: “Annual Meeting of Limited Partners,” Buckeye Partners LP, last accessed August 2, 2017.

While many energy companies were struggling, Buckeye was actually growing its profits.

Last, but certainly not least, the partnership has maintained solid coverage of its distributions. In the last 12 months, Buckeye achieved a distribution coverage ratio of 1.08 times, meaning it was not paying out all its available cash flow.

Oil prices may continue to fluctuate, but with a fee-based business and solid financials, this 7.9% yielder deserves the attention of income investors.

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