Companies that pay high dividends are always popular among income investors, and why not? In the current environment of low interest rates, investors are attracted to dividend-paying companies. Here are three companies with a high dividend yield, and a look at why they’ve all got sufficient income opportunities to continue providing high returns to stockholders.
Trona ore acquisition and growth potential in Illinois basin
On Jan. 23, 2013, Natural Resource Partners LP (NYSE:NRP) acquired a minority interest in Oriental Chemical Industries (OCI) for $292.5 million. OCI is Wyoming’s trona ore mining operation and is located in the Green River region of the state; trona ore is a naturally-produced form of soda ash. This acquisition was done to diversify from the Central Appalachia region’s coal operation, which is facing a downturn due to weak demand of steel worldwide. A decrease in demand has resulted in a decline in the prices of metallurgical coal and idleness in mining operations. OCI Wyoming is the fifth-largest producer of soda ash in world and operates a trona ore mining and soda ash refinery. Demand for soda ash is rising worldwide as it is used in a variety of consumer products like soap, glass, and more. The acquisition will provide the company with annual revenue opportunity of $30 million and give it more prospects for future growth.
The company is also making progress with its diversification in the Illinois Basin. Natural Resource Partners LP (NYSE:NRP) acquired coal reserves at the Deer Run mine in the Illinois Basin in 2011. The increase in coal volumes there is helping to offset the decline of coal volumes in Central Appalachia. Illinois Basin coal costs 40% to 50% less than Appalachian coal because the coal stratum in Illinois is not as deep in the earth or as difficult to extract; this gives the company strong growth potential. The coal royalty revenue in Illinois region was $49.5 million in 2012, and is expected to rise to $54.7 million this year and $64.7 million in 2014.
The company’s diversification in trona ore and the Illinois basin will increase its revenue. Distributable cash flow will rise to $251.5 million this year from $246.7 million last year, increasing the company’s median yield from 7.2% to 10% by the end of the year.
Data center opening and FCC ruling
On June 3, 2013, Windstream Corporation (NASDAQ:WIN) announced plans to build a new enterprise-class data center in Charlotte, NC to meet increasing demand for its services. This will be Windstream Corporation (NASDAQ:WIN)’s seventh new data center in North Carolina and its fourth in Charlotte. The construction and design of the data center is already underway, and the facility is expected to open by the end of this year. This new center will be housed in a 72,000 square foot facility with multiple 10,000 square foot data center suites. It will handle Windstream’s full suite of hardware, data storage and cloud computing, and will provide customers with an improved level of service that helps them cope with their businesses’ changing technological needs. Windstream Corporation (NASDAQ:WIN)’s business service revenue will rise 2.6%, year-over-year, to $3.7 billion this year against $3.6 billion last year.
Windstream Corporation (NASDAQ:WIN) has also filed an application with the Federal Communication Commission to provide $485 million in rural broadband expansion under the Connect America Fund 2. The latest FCC ruling provides a subsidy of $550 per line. Currently, 20% of Windstream’s broadband infrastructure is copper-fed Digital Subscriber line Access Multiplexer, or DSLAM. DSLAM has the capacity to serve 50 households with 12 Mbps of bandwidth, which is sufficient for email but not for video content. The capex subsidy of $550 per line from the CAF2 will help the company to upgrade its DSLAM to fiber, raising speeds to 20 Mbps. This FCC ruling will help Windstream Corporation (NASDAQ:WIN)’s revenue from consumer broadband to grow 10%.
