Yesterday marked the five-year anniversary of the Safety Net column.
On January 23, 2013, Safety Net premiered with a review of Intel (Nasdaq: INTC).
The stock was rated A for dividend safety and has not disappointed. In the past five years, Intel raised the dividend twice and has not cut it.
Since 2013, I’ve warned readers many times about companies whose dividends were not safe, only to be proven right a short time later when they cut their dividends.
In 2017 alone, Safety Net predicted several dividend cuts, including those by General Electric (NYSE: GE), Plains All American Pipeline (NYSE: PAA) and Prospect Capital Corp. (Nasdaq: PSEC).
But since we’re celebrating today, let’s focus on the good stocks, not the cutters.
Out of 948 stocks rated by SafetyNet Pro, a groundbreaking tool that predicts dividend cuts, 185 are rated A for dividend safety.
Four of the five highest-yielding stocks are real estate investment trusts or master limited partnerships. The top five are*…
- Apollo Commercial Real Estate (NYSE: ARI): 10% yield
I reviewed top-ranked Apollo Commercial Real Estate just last month.
I mentioned it received an A rating because of its strong net interest income growth and ability to cover the dividend.
- Buckeye Partners (NYSE: BPL): 9.6% yield
In the first nine months of 2017, Buckeye Partners’ distributable cash flow (DCF), a measure of cash flow for partnerships, slipped to $542 million from $555 million in the first three quarters of 2016. It paid out $542 million in distributions. So it covered the distribution, but just barely.
If the company’s fourth quarter DCF doesn’t push 2017’s full-year figure above 2016’s, we could see a downgrade. And if the full-year distribution is greater than the DCF, the downgrade could be significant.
The full-year results will be out February 9.
- Maiden Holdings (Nasdaq: MHLD): 9.1% yield
Maiden Holdings is a reinsurance company. The company has a very low 15% payout ratio based on cash flow from operations.
Despite its strong dividend safety rating and high yield, I have never been a fan of the company due to low confidence in the company’s management. Additionally, some have questioned the company’s accounting practices. I’m not the only one with concerns – the stock has fallen by more than 50% in the past year.
- TC Pipelines (NYSE: TCP): 7.5% yield
TC Pipelines has raised its dividend every year since 1999.
DCF totaled $238 million through the first nine months of the year. Similar to Buckeye, that’s down from last year’s DCF. It paid out $210 million in distributions, so it still has plenty of cash to cover the distribution.
The distribution isn’t in immediate danger, but if the company’s full-year DCF is below last year’s, it will likely receive a downgrade.
- Western Gas Partners (NYSE: WES): 7% yield
On the other hand, Western Gas Partners grew its DCF by 11% in the first three quarters of 2017. Its $695 million in DCF easily covers the $589 million in distributions it paid out during the year. I don’t expect any problems when the company reports full-year results in mid-February. In fact, the company just raised the dividend 7% over last year’s total.
Thank you to all of you who have read Safety Net and other articles on Wealthy Retirement over these past five years. A special thank you to those who have submitted stocks to be analyzed in the Safety Net column. The stocks that appear each week in Safety Net are suggested by readers.
So don’t be shy. If you have a stock whose dividend safety you’d like me to analyze, leave the ticker in the comments section below.
Happy anniversary to us! And thanks again for a great five years. Here’s to five more.
*according to Marc Lichtenfeld’s proprietary SafetyNet Pro database