The Safest MLP on the Market

 
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Editor's Note: In today's Safety Net, Chief Income Strategist Marc Lichtenfeld pulls back the curtain on one master limited partnership that sports a safe distribution despite a struggling oil and gas industry.

But believe it or not, this safe dividend achiever isn't his favorite way to play the sector...

Click here to learn more about the company that Marc believes has unearthed "Infinite Energy" - an alternative energy source independent of oil prices, natural gas, solar, wind and nuclear power...

A company that he believes is poised to quadruple in the next decade.

>Click here to hear more about this company and the WILD story behind it.<

- Mable Buchanan, Assistant Managing Editor

The Safest MLP on the Market

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

Last week, I covered Energy Transfer (NYSE: ET), one of the most popular master limited partnerships (MLPs). Because of their high yields and tax efficiency, MLPs are a favorite of investors.

SafetyNet Pro currently rates the dividend safety of 10 MLPs.

What Is SafetyNet Pro?
SafetyNet Pro is a groundbreaking tool that predicts dividend cuts with stunning accuracy. With it, you can determine the dividend safety rating of nearly 1,000 stocks. Access to SafetyNet Pro is reserved exclusively for subscribers of Marc's newsletter, The Oxford Income Letter. To learn more about SafetyNet Pro and The Oxford Income Letter, click here now.
 

Of these 10 companies, only two are rated "A" for distribution safety.

Today, I will cover the company that I consider to be the safest.

Enterprise Products Partners (NYSE: EPD) started in 1968 as a wholesaler of natural gas liquids. Today, it has 50,000 miles of pipelines, 260 million barrels of storage capacity and 22 natural gas processing plants.

Enterprise Products Partners' cash available for distribution (CAD), a measure of cash flow for MLPs, has risen each year for the past three years. This year, CAD is forecast to decline.

However, even with the projected lower CAD, Enterprise can still easily cover the distribution (MLPs pay distributions, not dividends).

If Enterprise Products Partners hits the $6 billion in CAD that Wall Street expects, it will likely pay investors about 65% of that total in distributions.

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Last year, the company paid just 58% of CAD in distributions.

Both numbers are figures I'm very comfortable with. They suggest that even if CAD falls further, the company generates enough cash to pay the distribution.

Chart -
 

Enterprise Products Partners pays investors $0.445 per quarter, or $1.78 per year. That comes out to a 9.5% yield. The company has raised its distribution every year since it began paying one in 1998.

That 22-year track record of annual payout increases, combined with a comfortable payout ratio, makes it easy to forgive the company's expected lower CAD this year - especially since it still more than covers the distribution.

Many MLPs' distributions are either on the chopping block or under consideration should things deteriorate further. Enterprise Products Partners' distribution should be safe for the time being.

Dividend Safety Rating: A

Dividend Grade Guide
 

If you have a stock whose dividend safety you'd like me to analyze, leave the ticker symbol in the comments section.

You can also search Wealthy Retirement to see if I've covered your favorite stock. Just click on "Search" at the upper-right part of the webpage and type in the name of the company.

Good investing,

Marc

P.S. One of the biggest benefits of MLPs is that they are a way to play the energy sector without relying on strong oil prices.

The same goes for my favorite energy stock - which is currently trading for less than $10...

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