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This Overlooked Pipeline Stock Quietly Raised Its Dividend Again. Almost Nobody Covered It. (It's Now Yielding Nearly 8%!)
Key Points
Hess Midstream has been a very reliable dividend payer and dividend hiker.
The current war with Iran has bolstered shares of many energy companies.
You may not know much about Hess Midstream LP (NYSE: HESM), but if you're a fan of dividends, it's worth getting to know -- because its dividend was yielding a whopping 7.8% as of the end of August.
Hess Midstream produces and processes natural gas primarily from the Bakken and Three Forks Shale regions in North Dakota. Known, in part, as a pipeline company, it serves Hess (a wholly owned subsidiary of Chevron) and third-party customers -- and its shareholders.
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Its dividend is particularly impressive not only because of the size of the yield, but also because it has been increased quarterly for lots of quarters -- going back around nine years. Better still, these are not minor increases -- the quarterly dividend paid in mid-August was fully 7% higher than the year-earlier payout, and 56% higher than the dividend five years prior.
Image source: Getty Images.
That's not all -- Hess Midstream has also been buying back shares, which rewards shareholders by making each remaining share worth more. (Imagine cutting a pizza into six pieces instead of eight -- that's the effect of buying back and essentially retiring lots of shares.)
The war with Iran has provided a tailwind to some energy companies -- with Chevron, for example, up 36% year-to-date (as of Aug. 31) and ExxonMobil up 33%. Hess Midstream is up 21%.
As you dig into Hess Midstream and consider it, keep in mind that it's a "limited partnership" (LP), not an ordinary common stock. So it's a pass-through entity, tax-wise, and doesn't pay corporate income taxes. It passes the income and losses through to its limited partners (which includes you, if you own shares), who report them on their tax returns and pay any taxes due at their own tax rate. If you own shares of any LPs, you'll receive a Schedule K-1 form from each one come tax time, and you'll use that to report your share of the business's profits or losses on your return.
If this hefty dividend yield is appealing to you, take a closer look at Hess Midstream.
Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.