High-Yield Stock with Dividends for Low-Risk Investors
Added: (Tue Apr 23 2019)
Pressbox (Press Release) -
Your average S&P500 stock currently yields less than 2%, Because of that statistic, the majority of investors classify any return of over 4% as a high yield stock. Some companies that do trade on the S&P500 however, pay out more than double that level. While a large portion of these ultra-high yield companies come with a risk to match, a select few hidden gems, offer big payouts backed by solid foundations, and flawless financials. The biggest of these high income powerhouse is EnLink Midstream. Here is why we believe that investors should take a much more focused look at these two energy master limited partnerships.
Great Track record, with plenty of track left to run
EnLink Midstream is currently yielding investors around 8.6%, which is a very lucrative payout in the ultra-high yield space. To begin with, long term fee based contracts lock in almost 90% of EnLink’s cash flow, resulting in minimal direct exposure to commodity based price volatility. While this is taking place, the company has estimated it will generate more than enough positive cash flow to cover its yield by 1.3 to 1.5 times this year alone, which is a lot more comfortable in the eyes of investors for the majority of midstream companies. The icing on the cake for the company, is their solid and well maintained balance sheet, which is backed by a leverage ratio that should show between 3.9 to 4.2 times this year, which is almost four times the target that most MLPs set themselves.
With investors already impressed by these current facts and figures, it is the near to mid-term future we are liking the look of, the company themselves are on track to be even better in the coming few years. EnLink is set to invest between $1.2 billion and 1.5 billion USD on high return growth projects going through to 2021. As the expansions they are planning come bearing fruit, the company should grow their cash flow by over 10% their annual pace. What this will do is set a great support for the distribution growth at around the 10% range. With EnLink estimating their cash flow to expand at an increased rate in comparison to their payout, the financial metrics of the company will grow even stronger.
EnLink offers (to those investors who like to receive dividends) the best of two worlds. Firstly it provides ultra-high yield, and secondly that yield is based on solid foundations with a lucrative outlook. Over the course of the next two to four years, the company expects to increase the payout at a healthy rate for both themselves, and investors alike. The great combination of growth, income and financials which are strengthening every quarter makes EnLink a fantastic opportunity for low risk investors.
Lucy Zhang – Middleton Associates