The markets have experienced a solid Summer rally, and that has caused some investors to look beyond dividend stocks. However, the global economic challenges remain, and with the Federal Reserve considering more measures to boost what could be a failing recovery, rates could be poised to stay low for a number of years. That means investor demand for dividend stocks is likely to remain strong for the foreseeable future.
This gives investors an interesting choice as to what types of dividend stocks to focus on. There are the large cap favorites like Exxon (NYSE:XOM) or Johnson & Johnson (NYSE:JNJ), which seem to offer relative stability and a solid, albeit, not very large dividend yields. For example, oil giant Exxon now yields about 2.6%, and healthcare leader Johnson & Johnson has a yield of around 3.6%. These stocks do make sense as core holdings and for larger sums of money. However, lesser-known companies with small market caps can offer much higher rewards for investors willing to take on what might be more risk. These types of stocks can add some zest to a portfolio and provide yields that can be three times the size offered by large cap, widely-owned stocks. With that in mind, here is a closer look at one stock that pays a very generous yield of 9.2%, and is also seeing continued insider buying:
Martin Midstream Partners (NASDAQ:MMLP) offers a variety of services to the energy sector which includes: Terminalling and storage of fuels, natural gas services, sulfur services and marine transportation. Here are more details on each of these business segments:
Terminalling and Storage: It owns or operates 27 marine shore-based terminals and 12 specialty terminals in the Gulf Coast region. These terminals provide storage, and processing services to many energy
Natural Gas Services: Martin Midstream distributes and stores natural gas liquids (also known as NGL), which are then distributed to retailers, refineries and other users. It also owns a natural gas pipeline that runs about 200 miles in length, from Kilgore to Beaumont, Texas.
Sulfur Services: This company gathers and distributes sulfur produced by refineries. It also processes molten sulfur into formed solid sulfur, which is later used to manufacture chemicals and fertilizers. Plant nutrient, liquid, ammonium, and industrial sulfates are key products.
Marine Transportation: Martin Midstream uses a fleet which consists of 41 inland marine tank barges, 19 inland push boats and 4 offshore tug/barge units which are used to transport oil and gas products in various waterways. The transportation routes include domestic routes but also international areas such as the Caribbean, Central America, and South America.
These types of services see relatively stable demand, even in a
recession. That allows for steady cashflows, and dividend payments to investors. Martin Midstream has a strong history of distributing profits to shareholders and it has raised the payments over the years. For example, in 2005 the quarterly distribution was 52.5 cents, but thanks to regular increases, it now pays 76.25 cents per quarter.
Finally, it's important to note that multiple insiders have been consistently accumulating this stock throughout 2012. Many of the buys are smaller in size but the transactions are adding up in value. For example, On August 20, 2012, a few insiders bought shares in transactions worth about $15,000. However, in June, Joe Averett (a director), bought 2,000 shares in a transaction worth about $62,760 and on the same day, Scott Massey (also a director), bought 2,250 shares in a transaction valued at $70,000. Insiders tend to know their companies well, so the steady stream of buying is a very positive sign for other investors to consider. This stock was recently trading near $35 per share, but a recent pullback to current levels gives income investors another chance to buy at reasonable levels.
Here are some key points for MMLP:
Current share price: $32.52
The 52 week range is $28.01 to $37.91
Earnings estimates for 2012: $1.34 per share
Earnings estimates for 2013: $2.02 per share
Annual dividend: $3.05 per share which yields 9.2%
Data is sourced from Yahoo Finance. No guarantees or representations
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not provide specific investment advice. The information is for
informational purposes only. You should always consult a financial
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.