Chairman and CEO of Baird-owned Strategas Research Partners Jason Trennert has advised investors to adopt a defensive approach in 2023 due to a high likelihood of a recession. In addition to providing consistent income, many dividend-paying stocks are in defensive sectors that can weather economic downturns with reduced volatility. Companies that pay big dividends tend to have substantial amounts of cash and have good prospects for long-term performance.
With impressive top- and bottom-line growth, many top energy companies are returning more capital to shareholders in the form of dividends and share buybacks. Companies usually repurchase shares when they believe they are undervalued, an added bonus for oil and gas bulls. The energy sector is expected to enjoy another year of bumper earnings so it remains a good bet heading into 2023.
If you are looking for solid energy dividends, here are the top aristocrats and payout leaders.
VOC Energy Trust
Industry: Royalty Trust
Market Cap: $139.2M
Dividend Yield (FWD): 17.83%
Houston, Texas-based VOC Energy Trust (NYSE: VOC) is a royalty trust that acquires and holds a term net profits interest of the net proceeds from production and sale of the interests in oil and natural gas properties in the states of Kansas and Texas.
Like Master Limited Partnerships (MLPs), royalty trusts are typically high-dividend, tax-advantaged energy investments that are required to pay out a certain amount of their proceeds to investors.
VOC has an 80% term net profits interest of the net proceeds on the underlying properties. As of December 31, 2021, its underlying properties had interests in 452.5 net producing wells and 51,147.2 net acres. As of December 31, 2021, the company had proved reserves of approximately 2.9 million barrels of oil equivalent (MMBoe) attributable to the portion of the Kansas underlying properties; and approximately 5.4 MMBoe attributable to the Texas underlying properties.
Dorchester Minerals, L.P.
Industry: Master Limited Partnership (MLP)
Market Cap: $1.0B
Dividend Yield (FWD): 16.13%
Dorchester Minerals, L.P. (NASDAQ: DMLP) is a master limited partnerships that engages in the acquisition, ownership, and administration of producing and non-producing natural gas and crude oil royalty, net profit, and leasehold interests in the United States.In October, Dorchester Minerals declares $1.135/share quarterly dividend, good for a healthy 17.1% increase from prior dividend of $0.969. The shares now yield a juicy 16.13% dividend.
For decades, master limited partnerships, or MLPs, have been a source of reliable, high-yield income for energy investors. An MLP is required by law to derive at least 90% of its cash flow from commodities, natural resources or real estate. They, in turn, distribute cash to shareholders instead of paying dividends like a standard company would. MLPs combine the liquidity of publicly traded companies and the tax benefits of private partnerships because profits are taxed only when investors receive distributions.
The biggest draw of MLPs is that they are considered pass-through entities under the U.S. federal tax code. Whereas most corporate earnings are taxed twice (first through earnings and again through dividends), pass-through status of MLPs allows them to avoid this double taxation because earnings are not taxed at the corporate level. Another key benefit: Midstream MLPs act as toll collectors for the energy companies that use their pipelines. As such, their cash flows are protected by long-term, take-or-pay agreements, meaning they are less susceptible to commodity price fluctuations.
Black Stone Minerals
Industry: Master Limited Partnership (MLP)
Market Cap: $3.6B
Dividend Yield (FWD): 10.51%
Black Stone Minerals, L.P. (NYSE: BSM) is an MLP that owns and manages oil and natural gas mineral interests. It owns mineral interests in approximately 16.8 million gross acres, non-participating royalty interests in 1.8 million gross acres, and overriding royalty interests in 1.7 million gross acres located in 41 states in the United States.
Black Stone Minerals, L.P. reported record third-quarter results thanks in large part to increased production on its acreage. Even better, the company’s distributable cash flow and distributions are set to increase in 2023 as low-priced hedges roll off. BSM has been one of the better-performing MLPs with shares up 60.2% YTD.
MPLX LP
Industry: Master Limited Partnership (MLP)
Market Cap: $32.22B
Dividend Yield (FWD): 9.65%
MPLX LP (NYSE: MPLX) owns and operates midstream energy infrastructure and logistics assets primarily in the United States. In November, the company declared a $0.775/share quarterly dividend, good for a 10% increase from prior dividend of $0.705. The shares now yield 9.65%.
One of the biggest MLPs, MPLX has strong operating fundamentals as well as a high quality asset base meaning its dividend is largely safe. The company also maintains a strong balance sheet and a very solid distribution coverage.
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Magellan Midstream Partners, L.P.
Industry: Master Limited Partnership (MLP)
Market Cap: $10.4B
Dividend Yield (FWD): 8.29%
Magellan Midstream Partners, L.P. (NYSE: MMP) engages in the transportation, storage, and distribution of refined petroleum products and crude oil in the United States.MMP not only has a mature asset base that does not require large amounts of capital to maintain but the company has also been returning decent amounts of cash to shareholders through both distributions and buyback. The company has guided for $1.1 billion in total distributable cash flow this year.
Other top-paying MLPs are:
Enterprise Products Partners L.P. (NYSE: EPD)--7.86% Fwd Yield
Plains All American Pipeline, L.P. (NASDAQ: PAA)--7.44% Fwd Yield
Kinder Morgan, Inc. (NYSE: KMI)--6.18% Fwd Yield
By Alex Kimani for Oilprice.com
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market cap $78B (larger than all five of yours combined)
current price per share ~$9.60
dividends paid last year:
Past Dividends
Ex-dividend date Amount Record date Pay date
November 22, 2022 $0.6478
November 22, 2022 $0.4472
August 12, 2022 $1.30
August 12, 2022 $1.13
May 24, 2022 $0.5518
May 24, 2022 $0.683
April 14, 2022 $1.17
TOTAL $6.48 (66.8%)
Also note that it was not mentioned that MLPs have certain tax disadvantages. Be sure and check with a knowledgeable accountant about how profits and losses are taxed on MLPs.