Williams
Partners, symbol WPZ, is one of the few Master Limited Partnerships that I
included in any of my model Dividend Machine Portfolios. In April of 2011, WPZ qualified as a
Dividend Machine. http://www.themoneymadam.com/2011/04/williams-partners-symbol-wpz.html
As
far as income goes, WPZ has done pretty well. Four years ago our income was $2.81 per share
per year. Now we get $3.714 per share
per year a nice increase.
But,
Williams Partners has been troubled.
Their dividend has increased but their stock price has not and that is
because their earnings have not grown.
Growth
at the cost of Income
Access
Midstream Partners, symbol ACMP is going to merge with Williams Partners. For each share of WPZ you own you will
receive .8 shares of ACMP. It is
anticipated that the dividend will decrease but growth will increase which
eventually will lead to a resumption of dividend growth.
Seeking
Alpha published a very well researched article on this ownership change. It should help you decide how to handle your
position in WPZ. http://seekingalpha.com/article/2671715-industry-leading-growth-for-williams-partners-lp?ifp=0
ACMP,
like WPZ, has demonstrated excellent dividend growth over the four years they
have paid dividends. Their D/E ratio is
less than WPZ’s.
An
Income Investors Conundrum
Picking
Dividend Machines is an excellent way to secure dividend income that
increases. Often times this type of
strategy is considered boring and one that does not need attention. WPZ is a good example of a Dividend Machine
that needs attention.
The
ownership change of WPZ will result in a reduction of our income and that is
serious business to retired income investors.
Even with the cut, the new shares
may yield more than you can get from another, similarly safe investment. I say safe because while WPZ has had it
troubles, you have not lost money if you bought it in 2011 at around
$51.88. Today it trades at $51.18. Debt to Equity ratios are quite reasonable
and pipelines are needed.
Covered
calls might be able to make up the difference in the dividend cut but those
will materialize only when others think this change is valuable.
I
am going to hold for a while. Stay
tuned!.
TheMoneyMadam
