Magellan Midstream And 3 Proven High-Yield Income Strategies


  • In this article, I discuss three practical income strategies that are proven to deliver a stream of reliable yet expanding income.
  • They are wide-moat stalwarts in a cyclical industry, wide-moat business in turnaround, and wide-moat, secularly-growing businesses bought during a recession or idiosyncratic crisis.
  • I will then apply the principle to Magellan Midstream in greater detail.
  • In conclusion, I believe for those who believe the death of fossil fuel is greatly exaggerated, Magellan is a high-yield wide-moat income opportunity.
  • Looking for more investing ideas like this one? Get them exclusively at The Natural Resources Hub. Get started today »

In this article, I will use Magellan Midstream Partners, L.P. (NYSE:MMP) as an example to demonstrate the wide-moat cyclical income play, one of the three strategies we at The Natural Resources Hub use to generate a stable, high-yielding, and growing stream of dividends.

Three proven income strategies

Here are three practical income strategies that are proven to deliver a stream of reliable yet expanding income:

  • Strategy 1: wide-moat stalwarts in a cyclical industry;
  • Strategy 2: wide-moat business in turnaround; and
  • Strategy 3: wide-moat, secularly-growing businesses, bought during a recession or idiosyncratic crisis.

My focus in this article will be on the first strategy, using Magellan as an example. Nonetheless, the other two strategies are included in Table 1 for comparison, the relevant examples being Altria Group, Inc. (MO) and Moody's Corporation (MCO).

Examples of three income investing strategiesTable 1. Three income investing strategies used at The Natural Resources Hub. Source: Laurentian Research.

Retirees are fond of measuring stocks by their dividend yields. For example, as of December 14, 2020, Magellan yields 9.02% and Altria 8.02%. Precisely speaking, those are dividend yields to the current share price, which is only meaningful at the time when you're considering an entry.

Suppose you bought Magellan back in late March 2020 at around $35. Your Magellan shares are actually yielding 11.74% (i.e., 9.02% X $45.57 / $35), relative to your cost basis ($35). Yield-to-cost is a great measure to use when you hold a stock for the long haul.

The concept of yield-to-cost is especially important when it comes to dividend growth investing (aka, DGI). Take Moody's, whose dividend yield to the current share price is at an apparently uninspiring 0.82%. However, if you purchased your shares between November 2008 and October 2010 as I did, your cost basis should be around $24, and your yield-to-cost is at 9.40% today (on top of the capital appreciation

Magellan is just one of the many wide-moat ideas recommended by Laurentian Research for high-yield income. He manages an 11%-yielding DGI strategy and a GARP strategy, in addition to oil-gas and mineral strategies for high-alpha capital appreciation.

Find out why The Natural Resources Hub has been called 'the hidden-gem Marketplace service' by clicking HERE for a free trial.

This article was written by

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The best energy and mining stock ideas with multibagger potential

As a natural resources industry expert with years of successful investing experience, I conduct in-depth research to generate alpha-rich, low-risk ideas for the member of The Natural Resources Hub (TNRH). I focus on identifying high-quality deep values in the natural resources sector and undervalued wide-moat businesses, an investment approach that has proven to be extremely rewarding over the years.

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(1) a stream of high-alpha actionable investment ideas,

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Disclosure: Besides myself, TNRH is fortunate enough to have multiple other contributing authors who post articles for and share their views with our thriving community. These authors include Silver Coast Research, ..., among others. I'd like to emphasize that the articles contributed by these authors are the product of their respective independent research and analysis.

Disclosure: I am/we are long MMP, MCO, ICE, MO, VRSK. 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.

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