How I Plan To ‘Beat The Fed’ With Dividends
Let me tell you about a guy I know named Nat.
Nat’s known for enjoying the finer things in life. His 40th birthday was held at a marina in billionaire hotspot Montenegro. Palm trees were flown in from Uruguay. Caterers were brought in specially from London. Billionaires from across the globe were in attendance.
How did Nat join the billionaire elite?
On the surface, he appears to have built his more than $1.5 billion personal fortune in the metals and mining industries.
But look a little deeper and you’ll see that Nat’s biggest advantage has been his family’s reputation and financial backing.#-ad_banner-#
That’s because Nat is short for Nathaniel. His full name is Nathaniel Philip Victor James Rothschild. He’s the latest descendant of the legendary Rothschild family… one of the world’s most powerful dynasties since the late 18th century.
For over 200 years, the secretive family has had a hand in just about every major world event. Whether it’s bringing down Napoleon… building the Suez Canal… financing the California Gold Rush… or ushering in the railroad era… look closely and you’ll find Rothschild fingerprints everywhere.
Early on, the family made it a point to pass the wealth on to the next generation. Whenever one of the men died, his business was given to his sons. And if there was no male heir, the family sometimes chose to shut the business down rather than let it out of family hands. Marriages were also often arranged between cousins to keep the money in the family.
That’s why Nathaniel Rothschild’s net worth is a drop in the bucket compared to the entire family’s fortune. Even after donating property and assets worth billions of dollars, the Rothschild family nest egg is still estimated at over $300 billion.
Nathaniel Rothschild and many other billionaires have all benefitted from being born into wealthy families. They were put into better schools. They received personalized instruction. And they got financial assistance, favorable loans and sweetheart deals from their parents.
This may be unfair, but as you’ll see in a moment, there’s a way to make this situation work in your favor…
You see, there’s a small group of stocks that enjoy the support of “Rich Parents.” These special companies benefit from the same preferential access to loans, financial support and profitable business advice as the world’s wealthiest families.
Most importantly, because of their special advantages they could make you a small fortune in the stock market, as they’ve done for investors over the last 10 years…
If you’re a regular reader of StreetAuthority, you know I’ve talked about these “Rich Parent” stocks before. But today, I want to tell you about one of my favorites, because it’s the perfect example of the kind of “trust fund” stock that can make you a good deal of money in the market.
One Of The Top “Rich Parent” Stocks
With roots going back to 1906, change came slowly for Tulsa, Okla.-based ONEOK (NYSE: OKE). The company was founded to serve as a power producer for customers in Texas, Oklahoma and Kansas. Of course, with a geographic footprint like that, ONEOK was right in the heart of oil country and realized that it was advantageously positioned to help ship oil and gas from nearby wells into the national network of pipelines that soon began to cover the land.
Over the course of many decades, OKE built up an impressive set of regional pipelines. In the early 1990s investors were able to profit directly from the pipeline business via ONEOK Partners (NYSE: OKS).
OKS is now one of the largest energy-focused MLPs in the nation. Why would the parent company seek to structure its offspring as an MLP? Because companies that transmit oil and gas through pipelines generate very predictable revenues and profits, as volumes and pricing are pre-negotiated, and they require little additional capital to keep going once they are running. So the MLP structure allows them to simply pass on these predictable profits — mostly tax-free — to investors.
Of course if you are distributing your profits out to shareholders, you have little financial firepower in reserve if you want to make acquisitions or other major investments. And that’s where the “trust fund” relationship helps. When OKS needs money and doesn’t want to go hat in hand to Wall Street, it simply picks up the phone and calls up its rich uncle, OKE.
In recent years, that relationship has really started to pay off. The explosive growth in domestic natural gas production means the nation suddenly needs a lot more gas pipelines to bring the juice from wellhead to power plant. OKS is in the midst of a $5 billion spending spree that will keep its management busy until 2015.
Much of this work will be done far from home, roughly 1,000 miles to the north in the Bakken Shale region of Montana and North Dakota. Until OKS and others can lay down the pipelines, those regions are burdened with tractor-trailers carrying one load of oil or gas at a time. Residents can’t wait to get the thousands of trucks off the road, so those pipelines are being welcomed with open arms.
Here’s the best part of this business model: OKS has already lined up demand for the output from its planned network of oil and gas pipelines. So we already have a pretty good idea of what sales and profits will look like two or three years from now.
Action to Take –> Within a few short years, OKS’ heady slate of projects will start to bear fruit, but you don’t need to wait until then. The dividend will keep on growing in coming quarters, just as it has since 2005. Back then, this stock yielded $1.60 per unit. The current $2.86 per unit annual payout (which equates to a roughly 5.4% yield) looks set to scale new heights into mid-decade, setting the stage for even more robust yields if you lock your purchase in at today’s prices.
P.S. — Thanks to the “New American Energy Boom,” these “Rich Parent stocks” are all poised for good years ahead. One of these other “Rich Parent” stocks owns over 50,000 miles of pipelines across the country, it’s stock has soared nearly 300% since 2009 and it has increased its dividend for 35 quarters in a row going back to 2004. Another has returned over 700% since 2000. To learn more about these companies, click here.