Pipeline Company Entices Investors With 6.5% Yield, Partners With Warren Buffett Company

Pipeline Company Entices Investors With 6.5% Yield, Partners With Warren Buffett Company

Western Midstream Partners (WES) is a top dividend stock, boasting an annualized yield of 6.5%.




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The oil and gas pipeline operator paid 57.5 cents a share in its fourth-quarter dividend on Feb. 13. The company has been steadily raising its quarterly dividend, or “distribution,” most recently lifting it from 56.25 cents in October.

Western Midstream’s dividend produced a compound annual growth rate of 22% over the last three years, according to Dividend.com.

Its next quarterly dividend has not been declared yet, but last year’s first quarter distribution was announced in late April and paid around mid-May.

The dividend stock is in buy range from a four-weeks-tight pattern with a 35.04 buy point, according to its MarketSurge weekly chart. The buy range reaches to 36.09.

Western Midstream Partners is a master limited partnership. Under this business structure, the company avoids federal taxes if it pays at least 90% of profits to shareholders via dividends.

Its general partner is a wholly owned subsidiary of Warren Buffett holding Occidental Petroleum (OXY). Occidental owns 49.8% of Western Midstream and controls its operations. Occidental acquired the Western Midstream business as part of its acquisition of Anadarko Petroleum in 2019.

Western Midstream gathers, processes, transports, buys and sells natural gas, natural gas liquids and crude oil. It also disposes of waste water generated by oil and gas production. Its customers are in the Delaware Basin in West Texas and New Mexico, the DJ Basin in northeastern Colorado and in South Texas, Utah and Wyoming.

Profit Growth Looks Robust For This Dividend

“Focusing on the Delaware Basin, this was an extremely successful year for WES as throughput increased across all three products resulting in record annual throughput from the basin for our partnership,” said Michael Ure, president and CEO of Western Midstream, in the company’s fourth-quarter earnings release.

Western Midstream reported fourth-quarter profit of 74 cents a share, or a 13% drop. But FactSet estimates quarterly earnings of 82 cents a share for the first quarter, then 89 cents, 88 cents and 94 cents in the following three quarters. That would translate to gains of 38%, 41%, 26% and 31%.

Full-year 2023 earnings dropped to $2.60 a share, after a robust $3 in 2022. But FactSet estimates 2024 profit to rebound to $3.36 a share, or a 29% increase. The dividend stock’s full-year 2025 profit is projected to rise to $3.59 a share.

Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.

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