Why Stocks Like Kinder Morgan and Enterprise Products Have Such Attractive Dividend Yields
Energy infrastructure companies Enterprise Products Partners (NYSE: EPD) and Kinder Morgan (NYSE: KMI) pay whopping yields. With respective dividend yields of 7.5% and 6.3%, all you would have to do is hold the stocks for 13-15 years, and even without dividend growth the accrued dividends would mean the stocks pay for themselves. As such, they are no-brainer stocks to buy.
However, investing isn't as easy as that, and investors need to look at all sides. Here's the lowdown.
The first obvious but accurate thing to say is that these companies generate the earnings and cash flow to enable them to pay these generous dividends. As you can see below, by comparing free cash flow (FCF) per share with dividends per share, Kinder Morgan has consistently generated the FCF to cover its dividend in recent years. While that hasn't been the case with Enterprise Partners, its dividend is well covered.
Source Fool.com
