Donald Trump Owns Some Of The Best Dividend Stocks

| August 19, 2015

This isn’t about politics.

It’s about profits.  It’s about how you can profit from some of the best dividend stocks tucked away in Donald Trump’s portfolio.

Donald Trump pegs his net worth at $10 billion.  Others say he’s worth less.

Whatever.  We know that The Donald has a solid – and actually an enviable – portfolio of the best dividend stocks.

And no matter where you weigh in on his politics or his behavior, you’ve got to hand it to him on his dividend stocks.  He’s got some beauties.

Most of the names you’ll know…

Apple $AAPL, AT&T $T, Bristol-Myers Squibb $BMY, Caterpillar $CAT, Conoco-Phillips $COP, JP Morgan Chase $JPM, and Verizon Communications $VZ.

But one of The Donald’s favorites flies under the radar of most investors.

And another one of the top dividend stocks has gathered as much momentum recently as the Trump campaign.

Its share price is up 12% this year.  But unlike the Trump campaign, it’s been fairly quiet and seems content to stay out of the limelight.

This Donald Trump Stock Pays An 8% Dividend

It’s not exactly a household name.  The Dallas-based company has only been around since 1995.

It’s very expensive, trading at roughly 4 times the overall market P/E.

And like every other energy stock out there, it’s been brutalized.  It’s down 24% this year.

Is it one of the best dividend stocks?

What does Donald Trump know about Energy Transfer Partners $ETP that most of us don’t?

Tough to say, but here’s what we do know.

Energy Transfer Partners is in the natural gas business.  Specifically, it stores and transports natural gas.  It owns 7,700 miles of natural gas pipelines in Texas and 12,800 miles of intrastate pipelines.

The company is diversified and has other energy interests.  But it’s concentrated in what’s known as the midstream market.  It’s not focused on exploring and drilling upstream, and it’s not doing much retailing downstream.

So as long as natural gas flows and expenses are reined in, Energy Transfer Partners makes money.

Energy Transfer Partners is also an MLP, a Master Limited Partnership.  What does this mean for dividend investors?

For starters, the opportunity for a very attractive tax break.  You can pocket the exact same kind of tax break as The Donald.

The legal and corporate structure of an MLP is different from most companies because it dodges a big chunk of corporate taxes.  This is because most of the profits are passed back to shareholders in the form of a dividend distribution.

The IRS looks at this distribution not as a pure dividend, but as a return of capital, so taxes are deferred.

(You might want to talk to your accountant about this if you’re interested in the stock.)

And here’s something to keep in mind when you check out an MLP like Energy Transfer Partners.

The dividend payout ratio can run high.  The company is built to plow money back to shareholders.  It’s the same idea as a Real Estate Investment Trust (REIT) but with slightly different rules.

Right now, the dividend payout ratio for Energy Transfer Partners is over 200%.  For an ordinary company, that would be redlining… a high alert danger signal.  For an MLP, it’s not all that unusual.

What kind of income do you get from Energy Transfer Partners?

The dividend yield is high, up over 8%, and for the past two years it’s been growing.

Something else that’s been growing is the gross profit margin.  Year-over-year it’s gone from 6.57% to 9.10%.

So that’s the story on one of the dividend paying stocks owned by Donald Trump.

And here’s another one from Texas.  (The Donald doesn’t seem to mind sinking small fortunes into the backyard of Ted Cruz and Rick Perry.)

But for the past few quarters, this stock hasn’t been behaving very well.

Donald Trump’s Problem Child Dividend Stock

This stock is down a bundle this year…

Just like Energy Transfer Partners, it’s in the midstream energy business.  It’s a major player… 75,000 miles of pipeline.

And it’s another tax break waiting to happen, because it operates like an MLP.

But Kinder Morgan $KMI has probably caused the Donald as much grief as Megyn Kelly.

Take a look at this chart and see what’s been going on the past few months…

Donald Trump Dividend Stock Kinder Morgan $KMI stock chart

Back on April 23rd, before the Trump campaign caught fire, the stock was at $44.57.

Then Kinder Morgan caught a cold.  The stock swooned, and on August 7th, the day after the electoral season’s first Republican debate, it traded at $32.14.

That’s a 27% loss in 106 days.  Not exactly what The Donald wants to see.

Since then, Kinder Morgan’s been clawing its way back.  And Mr. Trump can always take comfort in the 5.82% dividend.

Those are two of the more rambunctious dividend stocks in his portfolio.

And if you lean toward a more subdued stock, you should discover…

The “Quiet” Donald Trump Dividend Stock

Not many blue chip stocks are up by double digits this year.

But JP Morgan Chase $JPM is, and it’s in the Trump portfolio.

The global bank pays a yield of 2.65%, which is fine, but about half the yield we see in the financial services industry.  The dividend payout ratio is a respectable 30.0% and the dividend has been growing for the past four years.

There’s also a noteworthy parallel you can draw between the stock and the candidate.

Both have been underrated.  JP Morgan Chase has outperformed analysts’ earnings expectations twice this year.

Are These Donald Trump Dividend Stocks Too Expensive?

There are a couple of ways to look at this.

The downturn in the overall market either gives us a gorgeous buying opportunity, or a signal to stay away for a while and avoid the trader’s classic “Catch A Falling Knife” dilemma.

Whatever the case, keep in mind that pretty much no matter what’s happening with the direction of the market, pricing tends to be relative.

The kind of dividend stocks the Donald owns will usually command a premium.

Especially his S&P 500 Dividend Aristocrat stock, AT&T.

But now and then you can even find the Dividend Aristocrats on sale.

Finding a Presidential candidate like The Donald…

That’s another story altogether.

Cordially,

Paul Duke
Dividend Stocks Research

Note: Paul Duke writes and edits DividendStocksResearch.com.  Sign up for our free dividend reports and dividend newsletter at http://www.dividendstocksresearch.com/free-sign-up.  We’ll show you how to create regular income by investing in dividend stocks, easily, step-by-step.

 

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