Tallgrass Energy Offers 13 Consecutive Quarterly Dividend Hikes (TGE)
By: Ned Piplovic,
Tallgrass Energy, LP (NYSE:TGE) has rewarded its shareholders with dividend hikes every quarter since the company initiated distributions in August 2015.
For 13 consecutive quarters, the company managed to maintain a double-digit-percentage growth rate. Additionally, the rising dividend payouts resulted in a current dividend yield of 8.4%. That outperformed various industry averages by 35% or more. While the company’s quarterly dividend hikes and the high yield offer above-average performance, the share price experienced moderate volatility and currently trades approximately 10% lower than its 52-week high from 12 months ago.
Furthermore, after dropping below the 200-day moving average (MA) in late November 2017, the 50-day MA languished below the 200-day MA for more than eight months. However, the 50-day MA broke back above the 200-day MA in a bullish manner in early August 2018 and has continued to rise. While that is one positive indicator of a potential share-price uptrend, the share price traded higher only briefly but has not established itself firmly above the 50-day MA in the past 30 days.
Interested investors should conduct their own due diligence to confirm growth potential and compatibility with their own portfolio strategy. Additionally, some of the risk from share price fluctuation would be mitigated by the steady flow of income with an outsized yield.
To ensure eligibility for receiving the next installment of quarterly dividend payouts on the Nov. 14 pay date, interested investors must take a position prior to the October 30, 2018, ex-dividend date.
Tallgrass Energy, LP (NYSE:TGE)
Based in Leawood, Kansas and founded in 2012, Tallgrass Energy LP provides crude oil transportation services to customers in Wyoming, Colorado and the surrounding regions of the United States. The company operates through three segments — Natural Gas Transportation; Crude Oil Transportation; and Gathering, Processing & Terminalling. Through these business segments, the company provides natural gas and crude oil, gathering, processing transportation and storage services for customers in the Rocky Mountains, Midwest and eastern Ohio regions. Additionally, the company offers water business services, including freshwater transportation, and produced water gathering and disposal in Colorado, Texas and Wyoming. As of September 2018, the company owned and operated more than 8,300 miles of natural gas pipeline and about 820 miles of crude oil pipeline across a broad portion of the U.S.
The share price began the trailing 12-month period from its 52-week high of $27.01 on October 18, 2017. From that peak, the share price experienced some volatility, but trended downward overall and lost more than 30% before reaching the 52-week low of $17.71 on March 26, 2018. After reversing direction at the March bottom, the share price settled into an uptrend with significantly less volatility and recovered 70% of its losses before closing on October 17, 2018 at $24.17. While still 10% short of its peak from 12 months earlier, this closing price was 36.5% above the 52-week low from March 2018.
While facing some headwinds with its share price over the past 12 months, the company extended its series of consecutive dividend hikes with four additional boosts in 2018. The current $0.51 quarterly payout is 2.5% higher than the $0.4975 amount from the previous quarter and 43.7% above the $0.355 payout from the same period last year. This current $0.51 quarterly dividend amount corresponds to a $2.04 annualized payout and the 8.4% current yield. Even if the share price rose back to its 52-week high, the yield would still remain relatively high at 7.6%.
Compared to the 2.35% average yield of the entire Basic Materials sector, Tallgrass Energy’s current yield is 260% higher. Furthermore, TGE’s current 8.4% yield is also more than 80% above the 4.65% simple average yield of all the companies in the Oil, Gas & Marketing industry segment, as well as 36% higher than the 6.21% average yield of the segment’s only dividend-paying companies.
The series of consecutive quarterly dividend hikes enhanced to total dividend payout seven-fold since dividend inception in 2012. This level of advancement corresponds to an average growth rate of 16% every quarter, or more than 60% per year.
The share price decline was higher than the 8.4% yield, which resulted in a total loss of nearly 4% for the past 12 months. However, the share price appears to be on an uptrend and could bring total returns back into positive territory – like the three-year total return of 14.5% – in the near future.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.