The company has paid uninterrupted dividends since 1976 and increased its payout by 10% annually since 2005. However, it recently encountered some challenges, sending its dividend yield above 4% to sit near its all-time high. While some investors are concerned about the safety of its dividend, we believe the company’s payout remains secure.
The company’s dividend yield sits just above 5%, its highest level in nearly 30 years. And its dividend continues to look secure thanks to its strong balance sheet. But the company’s high spending on growth projects, coupled with today’s challenging energy market, will likely put more pressure on the firm’s cash flow in the short to medium term.
The company enjoys an asset-light model which generates consistent free cash flow, holds profits fairly steady during industry downturns thanks to its variable cost structure, and earns solid returns on invested capital. When combined with management’s conservative capital allocation and the essential logistics services it provides, the company has been able to reward shareholders with higher dividends each year since it went public in 1997.
It’s a simple, boring business, and its time-tested operation, well-known brand, economies of scale, defensive profile, and dependable cash flow generation make it a reliable dividend aristocrat. All things considered, it seems likely to remain an appealing long-term investment for conservative investors seeking sources of safe dividend income.