While there isn’t an official definition of a high-yield dividend stock, most investors would lump any payout above 3% in that category these days. However, as attractive as that might be, some companies offer payouts that are more than double that level. Three of these ultra-high-yielders are…
A high yield with healthy growth
EnLink Midstream currently yields an eye-opening 8.7%. Usually, when yields get that high, it’s a cause for concern, but that’s not the case with EnLink. For starters, thanks to the stability of the long-term, fee-based contracts that underpin the bulk of its midstream assets, EnLink estimates that it will haul in between $730 million to $800 million in cash flow this year. That’s enough money to cover the company’s payout by a comfortable 1.3 to 1.4 times. On top of that, it has a strong balance sheet, backed by a 4.0 leverage ratio, which is right around the sweet spot for an MLP.
That healthy financial profile gives EnLink the flexibility to invest in high-return projects to expand its midstream footprint. Overall, the company expects to spend between $1.2 billion and $1.5 billion through 2021 on growth projects, which should increase cash flow by a more than 10% annual rate over that time frame. That should support a 5% to 10% yearly growth rate in its already outsize payout. Meanwhile, with the distribution rising at a slower rate than earnings, the company’s other financial metrics should get even better.
A high yield with an even higher growth rate
CNX Midstream currently checks in with an enticing 8.8% yield. Stable cash flow from fee-based contracts also supports that payout, which it covered by comfortable 1.39 times last year. Leverage, meanwhile, was much more conservative than most MLPs, at less than 3.0 last year.
That stronger financial profile gives CNX Midstream the funds to grow at an even faster rate. The company plans to invest $250 million to $280 million on expansion projects this year, which should increase cash flow by 15% at the midpoint of its forecast. That should fuel a similar growth rate in the distribution, enabling the company to maintain a conservative coverage ratio between…
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