Murphy Oil Corporation (MUR), Potash Corp./Saskatchewan (USA) (POT): Not All Dividends Are Created Equal

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Guaranteed income is a creature comfort that fixed-income investors had become accustomed to before the financial crisis of 2008. In the rearview mirror, the yield on the popular 10-year Treasury was north of 5%. Unfortunately for retirees and other income-seeking investors, that percentage has crumbled under the weight of Federal Reserve purchases and has remained below 2% since the end of March 2012.

Murphy Oil Corporation (MUR)

In an environment like this, dividends can be an investor's best friend, especially if the payouts are rolled back into more share ownership, thus compounding returns over the long term. But some investors can be blinded by high guaranteed returns and ignore the warning signs such as unsustainable payout ratios. (The payout ratio is calculated as dividends per share divided by earnings per share).

The good news is that the payout ratio of the S&P 500 constituents has come down over the past several decades. The historical average is around 50%, but a white paper by Global X Management, an ETF provider, shows that the ratio is now south of 30%.

Taking this key metric into account, I ran a screen for dividend payers in the energy and materials sector, trading on a major U.S. exchange with yields better than the 10-year Treasury and an even more sustainable payout ratio of less than 25% -- lower than the S&P 500 average. That low ratio gives the following five companies a tremendous runway to boost payments in the future with a very slim likelihood of having to trim the distribution.

Sand castles Topping my screen with a 10.4% yield and a 15.4% payout ratio is Hi-Crush Partners LP (NYSE:HCLP). Although you might be unfamiliar with this company, you're almost certainly aware of hydraulic fracturing and its current revitalization of North American energy production. Aside from water and chemicals, proppants are one of the most important aspects of the process. They keep the fissures open after the fracturing has taken place. Without them, the tremendous production rates that fracking allows for in tight geologic formations would not be possible. That's where Hi-Crush comes in, with its monocrystalline sand.

Although the company is relatively new, so is the explosion in fracking. Add the fact that Hi-Crush is tremendously solvent, with zero long-term debt, and that it operates with 58% net income margins in the booming demand for proppants, and investors should feel comfortable here.

Digging up yield With its core product coming out of the earth, Tronox Ltd (NYSE:TROX) supplies its titanium ore, titanium dioxide, and other mined minerals to buyers ranging from paint manufacturers such as Sherwin-Williams Company (NYSE:SHW) to paper producers. After a rough go of it during, and after, the financial collapse, Tronox reinstated its dividend in 2012 to the tune of a 4.8% yield.

Listening to the company's recent conference call to close out 2012, management was very bullish on the company's current position and its ability to sate both income and debt investors. When peppered with questions, company Chairman and CEO Tom Casey showed that he was more than comfortable with the annual $1-per-share dividend and the company's ability to take advantage of any strategic opportunities that might present themselves.

Improving liquidity and confident management bode well for this company's future. The overall yield might deteriorate slightly if the stock price bounces back, but it should remain well above the 10-year Treasury rate, barring any change in strategy at the Federal Reserve.

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