When planning for retirement, many investors focus on traditional income sources like bonds, annuities, or dividend-paying stocks. However, there’s a lesser-known asset class that offers both stability and attractive yields: pipeline companies and Master Limited Partnerships (MLPs). These entities operate the essential infrastructure that transports oil, natural gas, and refined products across vast networks, generating consistent cash flows and, in turn, reliable dividends.Why Pipelines and MLPs?
Pipelines function as toll roads for energy products. Regardless of commodity prices, they earn fees based on the volume transported. This fee-based model provides a cushion against market volatility, making pipeline companies and MLPs resilient during economic downturns. For retirees seeking steady income, these characteristics are invaluable.Top 5 Pipeline and MLP Dividend Payers
Here’s a look at five prominent pipeline companies and MLPs, ranked by the number of consecutive years they’ve paid dividends:
- Enbridge Inc. (ENB)
- Dividend Yield: Approximately 5.9%
- Years of Consecutive Dividends: Over 70 years
- Overview: Enbridge is a Canadian multinational energy transportation company. It operates the world’s longest crude oil and liquids transportation system. With a commitment to dividend growth, Enbridge has increased its dividend for 30 consecutive years, boasting a compound annual growth rate of 10% over that period.
- Enterprise Products Partners L.P. (EPD)
- Dividend Yield: Approximately 7.15%
- Years of Consecutive Dividends: 26 years
- Overview: EPD is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services. Its diversified asset base includes over 50,000 miles of pipelines. The company has a strong track record of increasing its distribution annually for over two decades
- Magellan Midstream Partners, L.P. (MMP)
- Dividend Yield: Approximately 4.91%
- Years of Consecutive Dividends: 20 years
- Overview: MMP primarily transports, stores, and distributes refined petroleum products and crude oil. The company has a history of steady dividend growth, reflecting its stable cash flows and disciplined capital management.
- Plains All American Pipeline, L.P. (PAA)
- Dividend Yield: Approximately 9.14%
- Years of Consecutive Dividends: 10 years
- Overview: PAA is engaged in the transportation, storage, and marketing of crude oil and natural gas liquids.Its extensive network and strategic assets have enabled it to maintain a solid dividend history.
- Energy Transfer LP (ET)
- Dividend Yield: Approximately 7.67%
- Years of Consecutive Dividends: 3 years
- Overview: ET owns and operates one of the largest and most diversified portfolios of energy assets in the U.S. After a period of restru
Integrating Pipelines and MLPs into a Retirement Portfolio
Consider the example of Jane and Robert, a retired couple seeking to supplement their income. They allocate a portion of their portfolio to a mix of the above pipeline companies and MLPs. This diversification provides them with a steady income stream, reducing their reliance on more volatile investments. The consistent dividends help cover their living expenses, while the potential for capital appreciation offers additional financial security.
Final Thoughts
Pipelines and MLPs may not grab headlines, but their role in delivering stable, high-yield income makes them valuable assets for retirees. By understanding and incorporating these “quiet giants” into a diversified portfolio, investors can enhance their financial well-being in retirement.
This material is an excerpt from my book, “9% Retirement Paycheck: How to Generate Steady, Worry-Free Income for Life.” It is available at Amazon.com in eBook or paperback format.
Disclaimer: For Educational Purposes Only
The content on this website is intended for general educational use and should not be considered personalized financial, legal, or tax advice. Always consult a qualified professional before making financial decisions. All investments carry risk, and past performance is not a guarantee of future results. The author assumes no liability for actions taken based on this content.