Introduction
In an article from April of this year, I talked about why heavy insider buying is a strongly bullish signal for a stock. Academic studies have demonstrated it, in fact. Buying when insiders do tends to outperform the market by 6-10% per year, and most of this excess return accrues in the first few weeks and months after the insider makes the purchase.
After regaining nearly all of its market capitalization this year (down only ~3.5% year-to-date), the stock market is looking particularly frothy. Then again, "the stock market" is heavily and increasingly dominated by its top components, namely the FAANG stocks. Many other stocks remain in the doldrums, and many of those stocks pay generous dividends to their shareholders.
In an ultra-low interest rate environment that seems poised to stay for a while, the following six dividend stocks that insiders have recently been buying could make attractive buying opportunities.
1. Enterprise Products Partners (EPD)
EPD is a midstream oil & gas master limited partnership that mostly focuses on natural gas and NGLs. The Houston-based company is one of the best managed midstream energy companies in the world, due in no small part to the strong alignment of interests between unitholders (i.e. the shareholders of the MLP world) and company insiders (executives and directors).
Year to date, the unit price has lost a little more than 36% of its value, mostly following the price of oil. But the beauty of EPD's business model is that most of its revenue is derived from long-term fixed-fee contracts. Take-or-pay contracts make up about half of its operating profit, while storage accounts for another roughly quarter of operating profit. Nat-gas storage has likely benefited from overproduction in the last several months, as the excess commodity has to be put somewhere until demand returns. Only about a quarter (give or take 10%) of
