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3 High Yielders Investing in Growth: MLPs

Stocks in this article: NS APL CQP

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Lisa Springer

NEW YORK ( Street Authority) -- Dividends can add a steady stream of income to offset bumps in a portfolio. Right now, investors can find some impressive dividend yields in pipeline stocks.

These companies, which provide the means for transporting oil and gas from wellhead to refineries, are considered to be the toll roads of the energy infrastructure. Because they earn fees that aren't dependent on energy prices and enjoy consistent demand for their services even when the economy slows, many pipeline stocks can produce steady cash flow and pay generous dividends.

Three high-yielding pipeline stocks are catching my attention right now, because they're making big investments that will be a strong catalyst for future distribution growth. The fact that they already yield more than 6% makes them particularly enticing for any income portfolio:

NuStar Energy LP (NS) yield: 8%

A spin-off from Valero Energy (VLO), which focuses on oil refining, NuStar owns crude-oil terminals and storage facilities, 8,400 miles of pipeline and two asphalt refineries. The company is the world's fourth-largest independent terminal operator in the United States and a leading asphalt producer.

In recent years, NuStar has consolidated operations, made accretive acquisitions and improved its balance sheet to investment grade. The company has been paying distributions since 2001 and has increased payments nine years in a row.

The company's latest financials are solid. NuStar improved EBITDA by 6% in the first nine months of 2011, to $391.7 million, compared with a year earlier, while increasing distributable cash flow per unit by 11%, to $3.79. For the full year, however, the company expects EBITDA to be flat because of a temporary shutdown of a customer's refinery.

The good news is that NuStar should begin reaping the benefits of nearly $500 million invested in facility upgrades and expansion later this year. The company is expanding a major terminal serving the Bakken oilfield, adding capacity to a pipeline serving the Eagle Ford Shale project and connecting other Mid-Continent oil fields to its system.

The fact that insiders recently purchased $10 million of the stock signals their confidence in NuStar's future. Shareholders will likely benefit from improved 2012 income and collect 8% while they wait.

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