It's true that dividend investors have it a little tougher in 2013.
Tax rates are heading higher, and dividends are subject to them. If you're lucky enough to be expecting even a half-million dollars in income this year, the value of dividend income against, say, income from municipal bonds is much lower.
But what if it were a really nice dividend? How nice? Try 6.89% nice.
The two Targas are actually the same company, operating out of the same office suite in downtown Houston's Wells Fargo Plaza. NGLS is a limited partnership.
Targa buys and runs pipelines and other facilities transporting natural gas and natural gas liquids to market. Most of its facilities are in Texas. So this is a risk-free Eagle Ford shale play. The company is also adding new facilities - at the end of last year it added Saddle Butte Pipeline LLC, which operates in the Rockies.
If you really want to play capital appreciation, you go with TRGP. But if it's income you're looking for, NGLS is for you. Since the company first went public in 2010, the dividend has been rising steadily. What began as a 6 cent dividend in the first quarter of 2011 had become a 42 cent quarterly dividend by the third quarter of 2012, and the most recent report, delivered last Tuesday, is that the fourth quarter dividend will be 68 cents/share. There are no indications that's going down. In fact there is every indication it could go up, as the value of pipeline transport keeps rising as the amount of NGLs available for transport rises. Just keep that $2.72 rate going for a full year, on a $40 stock, and you're talking some serious money indeed.
The guys running this operation are all experienced oil field players. My favorite name among them is CEO Joe Bob Perkins, 51. Since leaving McKinsey in 1994, Joe Bob has been with a bunch of folks, most notably Reliant, and was the founding president of Targa from 2005 until taking the CEO chair last year.
Almost half the stock, and over half the float, is held by big institutions like Goldman Sachs, or energy specialists like Tortoise Capital. In other words, these are folks who know the business, and who know a good deal when they see one.
This is a good deal. If you'd rather go for a municipal bond yielding 3%, go for it. But if you're willing to share some with the tax man, you can still do better than that with NGLS.