If you’re a bargain hunter, right now is a great time to dig around for discounts. But if you’re a bargain hunter looking for passive income, it can be a bit trickier to find stocks that promise both an increase in dividend yield and solid future income.
Inter Pipeline hit headlines last month when rumours started swirling around the company that an acquisition could be on the horizon. However, this ultimately didn’t happen, yet shares didn’t plummet. Instead, investors started paying attention to this neglected stock, which seems to have a strong future ahead of it and can support further dividend increase.
The news came around the same time as the company’s earnings reports, where management shared an action plan to reduce the company’s debt. This debt came mainly from the investment in the Heartland Petrochemical Complex, and its incredible price tag has weighed on shareholders for quite some time.
However, management has set out a way to handle the debt load and is already chipping away at it. Management also shared how Heartland will be an enormous contributor to the future of the company, contributing between $450 and $550 million in earnings each year once it’s completed in late 2021. Management also shared that the project remains on time and within budget — another bonus for patient shareholders.
With cash like that coming in, that means even though an acquisition fell through, investors shouldn’t worry about future dividend payments. In fact, it’s the opposite. All that cash flow means the dividend should increase in the next few years, from where it is now at 7.17% as of writing. The company offers $1.71 per share per year in dividends, whereas some of its peers offer double that amount. That’s a huge increase for today’s investor.
Importantly, this stock remains incredibly cheap. Inter Pipeline has been unnecessarily weighed down due to the oil and gas industry. The glut in oil and gas has left every stock involved slumping. Yet this glut means companies like Inter Pipeline are needed now more than ever. All Inter Pipeline needs isn’t even for its own projects to come online, but really any pipeline project to come online. This will prove that pipeline companies are set up to make a killing in the next few years to alleviate the strain placed on the oil and gas industry.
With a share price of around $24 as of writing, this stock is set up for a major boost in the future. That boost should bump up dividends as well as the company continues to chip away at debt. So, for the patient investor, look to those that bought even a year ago. This company has increased its dividend by an average of 6% every year for the last five years. Year to date, the stock is up about 24%. So, if you’re willing to buy now and hold on, those shares and dividends could rocket even further.
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned.