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Dividend growth machines that combine attractive current yield and sustainable inflation-beating dividend growth are a core pillar of a retirement portfolio. I detail two such opportunities that look attractive today. I also share some of the risks to keep in mind.
The Alerian MLP ETF trades below 2014 levels, but it offers a ~7% yield, and it raised distributions for four consecutive years. This is where the entire bull case lies. AMLP's cash flows depend on US energy volumes, not oil prices. This positions it as a volume-driven play in the ongoing energy supercycle, which I think is not finished yet. The fund is highly concentrated in midstream leaders, with nearly 90% by weight raising payouts YoY and strong distribution growth projected through 2027.
Collecting nearly $10,000 a month in retirement without a pension sounds like a fantasy reserved for the ultra-wealthy, but the math behind one retiree's seven-holding portfolio reveals a specific set of tradeoffs that most income calculators never warn you about.
The Alerian MLP ETF (AMLP) offers a 7.28% yield and has appreciated 16.99% over the past year, benefiting from surging energy infrastructure volumes. AMLP's holdings are established midstream MLPs with fee-based, volume-driven cash flows, insulated from commodity price volatility and supported by rising U.S. energy production and exports. Distribution growth is robust: AMLP has raised payouts for four consecutive years, with Q3's $1.03 distribution annualizing to a 7.4% forward yield.
Brent crude oil rose above $100 a barrel for the first time since July, while the U.S. benchmark West Texas Intermediate (WTI) crossed $95, with varying impacts on energy ETFs. The price surge followed escalation in the Middle East conflict, including U.S.
Equity markets remain in a prolonged, robust bull run, demanding high selectivity for new opportunities. Infra and utility sectors are heavily dependent on AI, while energy and midstream appear overinflated due to war-related factors. High-duration assets are considered excessively risky in the current environment, favoring cash preservation instruments like high-quality CLOs and T-bills.
Some of my biggest winners in the past remain very attractive opportunities today. I detail why these names combine high yield, strong growth, and sound fundamentals. I also discuss the risks they face.
Albert wrote in this week about a problem that can sometimes plague your investments. His email started, “Sometimes I like something that is too complicated for me to handle the taxes.