As I’m always looking for new dividend stocks to add to my portfolio, I recently initiated some high-yielding positions that you might want to consider.
The companies I chose are fairly priced and set to do well. Here are three dividend stocks I initiated positions in recently:
Eaton (ETN)
The first company I purchased shares in was Eaton (ETN). Eaton operates as a power management company worldwide. Eaton has increased dividends for five years in a row. However, Eaton has not cut dividends to shareholders but increased it every other year since 1983.
Eaton has managed to deliver an 11.80% average increase in annual earnings-per-share over the past decade. Eaton is expected to earn $4.60 per share in 2014 and $5.34 per share in 2015. In comparison, Eaton earned $3.90 per share in 2013. The annual dividend payment has increased by 13.80% per year over the past decade, which is higher than the growth in EPS.
Currently, Eaton is attractively valued at 13 times forward earnings and has a dividend yield of 3.30%. I initiated a position in Eaton in the past quarter and have since added to it. I would be looking forward to adding to my position Eaton in the coming years, subject to availability of funds, opportunity cost and valuation.
Williams Companies (WMB)
The second company I purchased was Williams Companies (WMB). Williams Companies owns the general partner interest in Williams Partners (WPZ) and Access Midstream Partners (ACMP) along with any limited partnership units in both MLPs. Those interests are pretty valuable, especially if the pipelines do manage to increase cashflows.
Williams Companies is a dividend achiever, which has managed to raise dividends for 11 years in a row. Williams Companies has a pretty aggressive plan to increase dividends per share through 2017 and expects to pay $2.46 in 2015, $2.82 in 2016 and $3.25 in 2017. Given the current annual payment of $2.24 per share, which translates to a roughly 4.70% current yield, I would be interested in Williams Companies even if growth slows down to 5% – 6% a year.
However, Williams Companies expects to grow dividends by 15% per year through 2017. Those projections are one of the reasons I initiated a position in Williams Companies a few months ago. Given that pipelines are under pressure in the past two weeks, I think prices are starting to get more attractive.
Kinder Morgan (KMI)
My third recent transaction involved some shares of Kinder Morgan (KMI), which I sold in my taxable account and purchased Kinder Morgan Management (KMR). Once the Kinder Morgan merger closes, I will end up with KMI anyway. A few weeks ago, I discussed that there is an arbitrage opportunity, where by purchasing KMR shares, an investor who waits till the acquisition by Kinder Morgan is complete, can end up with more KMI shares than purchasing them outright.
On the plus side, KMI announced it increased quarterly dividends to 44 cents per share, which is a 7.30% increase over the same rate paid in the same quarter last year. Unitholders of Kinder Morgan Energy Partners (KMP) will get a quarterly distribution of $1.40 per unit, which is a 4% increase over the same distribution paid to unitholders in the same quarter last year. Given that KMR is equivalent to KMP, minus the ominous tax structure of a partnership, and given its higher yield relative to KMI (plus it is not taxable since I get shares “reinvested” without triggering any taxable liabilities to the IRS), I think that I made the right choice.
Full Disclosure: Long ETN, WMB, KMI, KMR.
