Editor’s Note: Nathan’s pick today yields 8.3% from the moment you buy it. But the most powerful income stories aren’t the ones that start high — they’re the ones that compound. Our colleague Robert Rapier has spent 36 years tracking essential-service companies that raise their dividends year after year. His portfolio of 41 stocks now averages 33% annually on his original investment, with five positions paying over 100% on cost. See how the math works →

You probably haven’t heard of cryolite. But it’s undoubtedly one of the world’s scarcest natural resources. Commercial quantities only exist in one place on the planet (the western coast of Greenland). After years of dwindling production, the well finally ran dry back in the 1980s and mining activity ceased altogether.

It is said that cryolite is the only resource to ever be mined nearly into extinction. Given that rarity, the mineral must be extremely valuable, right? Well, not really, because nobody is interested in buying the stuff anymore. Cryolite was mainly used as a solvent to help separate aluminum from bauxite ore. But when supplies started to run low, a synthetic substitute was developed.

So now, it’s little more than a curiosity.

It may seem counter-intuitive, but the world’s rarest resources don’t always generate that much wealth. That’s because their applications are limited. Conversely, some of the biggest money-makers (like iron ore) are plentiful. Ultimately, it’s the delicate balance between supply and demand that dictates prices.

I was reminded of all this recently while reading an update on Exxon Mobil’s (NYSE: XOM) massive petrochemical plant near Corpus Christi, Texas. The sprawling 1,400-acre site (which cost $10 billion to construct) has the capacity to produce 1.8 million tons of ethylene per year. For context, that’s enough to fill 576,000 Olympic-sized swimming pools.

But then again, this isn’t cryolite.

We’ve seen a tremendous wave of petrochemical expansion and development on the U.S. Gulf Coast in recent years. This is just the latest project. But the incremental capacity has been absorbed… and global buyers remain hungry for more. Exxon has wagered $10 billion that global consumption of this critical compound will continue to rise.

And I’m betting they’re right.

In its purest form, ethylene is a naturally occurring hormone found in fruits and plants. But suppliers don’t exactly walk out into the field and collect it with mason jars. Large-scale manufacturing is a bit more technical and typically requires steam cracking. This aptly-named process involves the use of steam to heat and crack the molecular bonds of liquid petroleum-based feedstocks, allowing for ethylene gas to be separated.

From there, this intermediate compound is sometimes sent through production lines (known as trains) for cooling and polymerization treatment, resulting in polyethylene pellets – the raw building blocks of plastics. Downstream processing plants mold these pellets into usable products such as polyethylene terephthalate (PET).

This wonder material (first discovered by DuPont scientists in the 1940s) possesses many important attributes. It’s clear, strong, and inert – almost like glass, but lighter and shatter-proof. Naturally resistant to contamination and spoilage, it’s the ideal packaging material for countless foods, beverages, and household products.

Salad dressing, peanut butter, cooking oil, apple juice, ketchup, aspirin, and shampoo, just to name a few. Walk into any supermarket or convenience store, and virtually every bottled water or two-liter soft drink you see will be packaged in this stuff.

And consumer packaging is just one application. There are countless other industrial uses. Antifreeze. Lubricants. Paints and coatings. Polyester fabrics. The list goes on. Put it all together, and you can see why ethylene has been dubbed “the world’s most important chemical”.

In decades past, most of the world’s supply came from the Middle East. That stands to reason, considering ethylene is typically derived from crude oil. But natural gas liquids (namely ethane) are another acceptable feedstock. And the U.S. is swimming in shale gas — we produce 100+ billion cubic feet per day.

This homegrown fuel source is plentiful and inexpensive. The cheaper the input, the more profitable the output — which explains why dozens of new cost-advantaged ethylene production facilities have popped up across Texas and Louisiana.

Not a moment too soon. Global consumption of this versatile raw material has now topped 200 million metric tons annually and continues to outpace GDP. Demand is widely expected to reach 230 million tons by 2030.

That forecast is welcome news for well-positioned players like Westlake Chemical Partners (NSDQ: WLKP). This master limited partnership (MLP) focuses strictly on one product.

You guessed it: ethylene

Let’s not confuse Westlake Partners with its parent Westlake Corp (Nasdaq: WLK). The latter is a diversified manufacturer offering a broad portfolio of vinyls and polymers. It’s a fine business, but with greater sensitivity to commodities prices and only a token dividend yield.

Westlake Partners owns and operates a world-class ethane-based production complex in Lake Charles, Louisiana. This facility can manufacture 3 billion pounds of ethylene annually. It operates a smaller plant in Kentucky that can churn out 730 million pounds, for a total company-wide capacity of 3.7 billion.

That gives the partnership nearly a 10% share of the domestic ethylene market.

Unlike most suppliers, Westlake Partners doesn’t have to worry about finding customers. That’s because 95% of its output is sold directly to its parent under a long-term contract. The remaining 5% goes to outside third-party buyers. Nor is price volatility an issue, considering all this ethylene is sold at a fixed profit margin (net of all expenses) of $0.10 per pound.

There is a pricing agreement in place whereby WLKP recoups all its feedstock costs — as well as operating overhead and maintenance expenditures — plus an additional ten cents per pound. That may not sound like much. But when you make over 70 million pounds per week, those dimes add up.

You’d be hard-pressed to find a more transparent and predictable cash flow stream. Most manufacturers will see their income levels swing with changes in either sales volume or prices. Here, those variables are set. In fact, parent Westlake Chemical has signed a take-or-pay agreement, meaning it has committed to buy pre-determined quantities regardless of actual usage. That’s a nice insurance clause during the occasional hurricane outage.

Demand simply isn’t an issue. Westlake Chemical needs every last drop of the partnership’s ethylene production — and then some. This is the critical raw material it needs to make polyethylene, styrene, PVC, and other value-added products.

If Westlake was a homebuilder, then think of Westlake Partners as the trusted lumber vendor.

Last quarter, WLKP generated $18 million ($0.51 per unit) in distributable cash flow (DCF). And as an MLP, that income is exempt from federal taxes, so most of the profits are disbursed to investors. Management aims for a DCF coverage ratio of 110%, meaning every $1 of dividend distribution is supported by $1.10 in cash earnings.

It was close to the mark (108%) last quarter.

Since the 2014 IPO, WLKP has maintained or grown payments for 47 consecutive quarters. Along the way, distributions have marched from $0.27 to the current $0.47 per unit. The annual payout of $1.89 equates to a hefty yield of 8.3% — in the market’s upper echelon.

Meanwhile, after bottoming out in the mid-teens last November, WLKP shares have bounced 25%. Some of the credit goes to continued shipping disruptions in the Straight of Hormuz, which have “meaningfully accelerated” export demand for North American chemicals.

Absent future expansions or asset acquisitions, growth prospects are modest. And be aware that while MLPs offer certain tax advantages, they can also complicate your tax filing. But the tradeoff is a deep income stream supported by crystal-clear cash flow visibility, which I’ll take in this inflationary environment. Strong financial health and trustworthy corporate governance only add to the appeal.

There are no planned maintenance outages for 2026, which should help maximize production and sales volume. And knowing that 95% of tomorrow’s output has already been spoken for (at a contractually fixed profit margin) provides some stability in these volatile times.

The dividend discipline Nathan describes today — a fixed-margin business, take-or-pay demand, 47 consecutive quarters of maintained or growing distributions — is exactly the kind of structural advantage our colleague Robert Rapier hunts for in Utility Forecaster. What makes WLKP interesting is the same thing that makes Rapier’s approach work: predictable cash flow leads to predictable (and rising) payouts. In his portfolio of 41 essential-service stocks, decades of that discipline have compounded a 3% yield into an average of 33% annually on his original investment — with five holdings now paying over 100% on cost. See which 41 stocks are on the Dividend Map →