With baby boomers retiring, demand for high yielding instruments is sky rocketing as investors are trying to make up for the loss in portfolio values. During rising inflation, organizations that have the power to pass price hikes onto consumers will be able to meet the investor's demand. We will take a look at some companies that are best suited to meet the investor's challenge.
Copano Energy (CPNO)
Copano is a midstream natural gas company in the business of gas gathering, intrastate transmission, processing and treating natural gas. Over the last five years, CPNO has increased its dividend at a rate of 7.90% annually. During the same period its average yield has been 8.16%.with the current yield at 6.60%, which is much higher than 30 years treasury bonds.
CPNO has had losses during last few quarters. However, the company has positive cash flow and has still paid its dividend over these periods, which it is able to do because of its strong balance sheet. CPNO has low debt/equity ratio of 0.68 and interest coverage of 0.9. CPNO has increased its revenue by 6% compounded quarterly.
With the demand for natural gas increasing due to high oil prices and substitution, as well as the ability of the oil and gas industry to pass on price hikes to the consumers, CPNO will be in a strong position to meet its future commitments, whether it is interest payment or maintaining its impressive dividend growth rate.
Energy Transfers Partners LP (ETP)
Energy Transfers Partners is a master limited partnership engaged in the midstream business of interstate and intrastate transportation of gas and retail propane related operations. ETP has a current dividend yield of 7.8% and 5 year average dividend yield of 7.4%. It is trading at 46.11 with P/E of 40.09.
ETP has current payout ratio of 300% with 5 years average of 142%, which is in line with other MLPs. ETP has debt/equity ratio of 1.35 and interest coverage of 2.5. The company has positive cash flow and EBITDA margin of 23.5%, which is a bit higher than the industry average. All these ratios put ETP in financially sound condition.
With demand for energy expected to increase over coming years and focus shifting to natural gas, ETP’s units will be sought after by income investors looking to replenish their portfolio in a relatively short period of time.
HealthCare REIT Inc. (HCN)
HCN is real estate investment trust engaged in healthcare and senior housing. Its portfolio of products ranges from medical facilities, senior housing, medical centers, and life sciences buildings. HCN has current dividend yield of 5.3 with a 5 year average of 6.3.
With an ageing population in the U.S., demand for health care services and senior housing is constantly rising. This is very evident from the rising share price over the last 10 years, and now at the time of writing HCN is trading at 54.04.
HCN has a 5 year average payout ratio of 196, which is in line with the REITs. Although the organization has a high depreciation charges, it has positive net income over the last 5 years. With interest cover of 1.4, debt/equity of 1.10 and EBITDA of 37.4% HCN is in a very robust financial condition. With demand for it product increasing, HCN holder will be smiling irrespective of the condition of the economy.
Verizon is a provider of wireless and wire line communication services in over 150 countries. Its product and services range from wireless voice and data services, broadband video and data, internet access.
Verizon is one of the more consistent dividend payers. It has consistently increased its dividend at an average rate of 3.51% annually over the last 5 years and has a payout ratio of over 80%. During the same period its average yield has been 5.10% with a current yield of 5.37%.
Verizon’s current P/E is 16.25 which is in line with the 2011 estimated EPS. However, with 2012 EPS estimated to be 2.60 Verizon is trading at P/E of 13 i.e. at a discount of 25%.
Verizon has interest coverage of 3.0 and debt/equity of 1.57. Verizon has EBITDA margin of 29.1%. Its financial statements are looking very strong with positive cash flow from its operating activities over the last 5 years. Its revenue has increased by 4.82% over the last 5 years annually.
With its global presence and fundamentally strong financial conditions Verizon should be bale to meet the expectations of the investors in the future.
EastGroup Properties Inc. (EGP)
EGP is a real estate investment trust (REIT). It is engaged in the business if acquisition, development and operating industrial properties in Sunbelt markets of US. With the real estate industry taking hit during the financial crisis, company suffered however, since then it has been marching ahead steadily.
EGP has a current dividend yield of 4.56% and the average for the last 5 years has been 5.23%. EGP’s dividend growth rate slowed down during the crisis and the average growth rate over the last 5 years has been 1.19% annually. EGP’s dividend payout ratio has hovered between 60-70% over the last 5 years.
EGP has interest cover of 1.5 and debt/equity of 1.87. EGP’s EBITDA is 31.1% and revenue has grown by 5.67% over the last 5 years.
With the real estate sector improving and the industry slowly healing, EGP has seen the worst and should start increasing its dividends once again in the near future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.