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Summary

  • For each S&P 500 industry sector, I will be taking a look at available companies to help determine the best stocks for income investors.
  • In determining the best stocks per industry, I will be examining both the dividend growth and dividend yields of the stocks.
  • Out of this group of Oil & Gas Refining & Marketing & Transportation stocks, I feel that Kinder Morgan is currently the best long term option for income investors.

Overview

In this series of articles, I will be identifying which S&P 500 stocks for various S&P industries are best suitable for income investors, based on dividend growth and yield. For Part 20, I will be taking a look at Oil & Gas Refining & Marketing & Transportation stocks. These stocks include:

  • Kinder Morgan (NYSE:KMI)
  • Marathon Petroleum (NYSE:MPC)
  • Phillips 66 (NYSE:PSX)
  • Spectra Energy (NYSE:SE)
  • Tesoro (NYSE:TSO)
  • Valero Energy (NYSE:VLO)

When ranking the dividend paying stocks by yield, the order is as follows:

  • Kinder Morgan - 4.98%
  • Spectra Energy - 3.24%
  • Phillips 66 - 2.35%
  • Marathon Petroleum - 1.87%
  • Tesoro - 1.78%
  • Valero Energy - 1.77%

When ranking them by dividend growth over the past five years, the order is as follows:

Because of spinoffs/acquisitions involved with the selected companies, I will only be looking at data from late 2011 on for some companies.

  • Kinder Morgan - 200.00%
  • Phillips 66 - 150.00%
  • Tesoro - 150.00%
  • Marathon Petroleum - 110.00%
  • Valero Energy - 66.67%
  • Spectra Energy - 34.00%

Kinder Morgan has the highest yield and has seen the best dividend growth over the past several years.

Taking a look at financials, revenue/earnings growth, and valuation, I will evaluate whether or not Spectra Energy or Phillips 66 (the next two highest yielding stocks) are possible better long term investment options compared to Kinder Morgan.

In terms of revenue, Kinder Morgan has seen significantly more growth than either Spectra Energy or Phillips 66.

KMI Revenue (<a href=

KMI Revenue (TTM) data by YCharts

Kinder Morgan is also the only company out of the three that has seen positive earnings over this time period.

KMI EPS Basic Chart

KMI EPS Basic (TTM) data by YCharts

Based on PE ratio, Phillips 66 is the most attractively priced stock, while Kinder Morgan is the least attractively priced.

KMI PE Ratio Chart

KMI PE Ratio (TTM) data by YCharts

Conclusion

Kinder Morgan has seen the highest dividend growth recently and also offers the highest yield. Considering the company has also seen the best earnings and revenue growth out of the higher yielding stocks, I think it is a fair assessment to consider Kinder Morgan the best long term option for income investors out of this group of stocks.

The company has a strong history of growth and with a large project backlog (according the company's last earnings call, the company generated $2.4 billion worth of new backlog projects in the quarter alone), I don't see any reason to assume this growth will not continue into the future.

As always, I suggest individual investors perform their own research before making any investment decisions.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: The Best Dividend Growers, Part 20: Kinder Morgan