In a recent article
, I touched on several of the opportunities available to income investors in the energy industry. It just takes knowing where to look.
You see, we recently discovered that more than half of the 21 best income stocks of the past decade come from the energy sector. But since most of the energy investments on that list are not household names, it occurred to me that many investors may not even know the sort of opportunities that are waiting out there.
So in the weeks and months ahead, I'll be bringing you some more insight on my favorite "energy+income" investments that you may not be aware of.
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For example, one of my top-rated stocks for subscribers to my Energy & Income advisory is a best-in-class player from a lesser-known energy niche -- oil refineries.
The company enjoys distinct advantages that have enabled it to quadruple its profits and triple its dividend in the past year, even while some of its competitors are closing up shop.
What's been driving the company's profits is something called a "crack spread." Put simply, the crack spread is the difference between what the refinery paid to get raw oil and the money it will be paid for its refined product. In short, the greater the margin... the greater the refinery's profit.
[Related -Exxon Mobil Corporation (XOM) Dividend Stock Analysis]
Refiners on the Gulf Coast and East Coast pay around $115 per barrel for Brent crude, most of which is imported from West Africa, the U.K., Russia, and Venezuela.
But Valero (NYSE: VLO), the nation's largest independent refiner, is fortunate enough to have access to cheaper oil from the Eagle Ford Shale in south Texas -- and has been paying roughly $20 less per barrel.
That gives the company a big edge over its competitors who have to use more expensive crude from overseas.