The Final and Automatic Retirement Plan

While the Automatic Income Machine system is designed to be an entire stock portfolio, I’d like to highlight three “all stars” in the portfolio. These stocks represent some of the highest dividend growth rate stocks in the entire market.

  1. Phillips 66 Partners LP (NYSE:PSXP) is an MLP that provides pipeline, storage, and terminal services to its sponsor, Phillips 66 (NYSE:PSX). PSXP is one of the small number of new style MLPs with a sponsor that will periodically transfer assets to ensure the MLP can hit its distribution growth forecasts. Phillips 66 Partners should grow its annual distributions at a 25% to 30% clip for at least the next several years.
  2. Tallgrass Energy LP (NYSE: TGE) is another oil pipeline company with massive dividend growth potential. After it’s recent acquisition of Tallgrass Energy Partners, the company is in an even better position to hike its dividend.Going forward I expect the company to be able to produce high teens annual dividend growth. The TEP distribution has been growing by 18% to over 30% year-over-year for the last several years.
  3. Antero Midstream GP LP (NYSE: AMGP): Antero Midstream GP owns the general partner incentive distribution rights (IDRs) paid by Antero Midstream Partners LP (NYSE:AM) to the general partner. With a stabilized MLP with growing distributions, the IDR payments will increase at roughly twice the growth rate of the LP distributions. This means that if the AM distributions increase at a 28% annual rate, the AMGP dividends will be growing by something like 50% per year. That level of growth will drive the share price higher, producing a very attractive, close to automatic (over several years) total return.

To see the rest of the stocks that make up the Automatic Income Machine portfolio, head over to the Start Out portfolio section of the website, click here for access