Energy
Credit Suisse Unveils MLPs to Buy for the Next 12 Months (LNG, TRGP, QRE, CQP, XTEX, GEL, DPM, ACMP, TLLP)
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Investors still love the realm of master limited partnerships (MLPs) for their oil and gas infrastructure dominance, and of course for those high returns of capital that act like dividends.
Earlier this week we reported on how MLP stocks performed in a rising interest rate environment. Many MLP investors most likely breathed a sigh of relief when the historical data showed that MLP stocks tend to perform very well during interest rate increases.
In a recent report the MLP analyst team at Credit Suisse Group A.G. (NYSE: CS) not only defined historical MLP performance versus rate hikes, but they also came out with a list of names to own for the next 12 months.
For a review, MLPs outperformed the S&P 500 between mid-2004 and mid-2007, the last period of rising interest rates in the past 20 years. MLPs lagged the performance of utilities during that time and were roughly in line compared to REITs. All of these income-oriented equities outperformed bonds. The outperformance relative to the S&P 500 in the 2004 to 2007 period does not necessarily mean MLPs would outperform again should interest rates increase. However, there are factors currently in place that lead the Credit Suisse analysts to believe that MLPs would perform solidly again should interest rates rise.
The Credit Suisse research team has picked the following nine top names that investors should own for the next 12 months.
Liquefied natural gas leader Cheniere Energy Inc. (NYSEMKT: LNG) kicks off the list. It has LNG terminal projects in Texas and Louisiana. The Credit Suisse price target is $33, and the Thomson/First Call consensus price target is $25.
Houston-based Targa Resources Corp. (NYSE: TRGP) provides midstream natural gas and natural gas liquid (NGL) services in the United States. The price target for the stock is $76, and the Wall St. estimate is $67. The company also pays investors a quarterly 3.0 % distribution. Remember, a distribution from MLPs can contain return of principal.
Investors searching for big distributions may want to look at QR Energy L.P. (NYSE: QRE), which sports an 11% distribution. The price target for QR Energy is $20. The consensus target is right in line at $20.
A subsidiary of Cheniere Energy, Cheniere Energy Partners L.P. (NYSEMKT: CQP), also makes the Credit Suisse top nine picks for the next 12 months. With a 6.80% distribution and a $28 price target, this is a solid name for investors also seeking income. The consensus price target is $27.50.
Dallas-based Crosstex Energy L.P. (NASDAQ: XTEX) is also a Texas and Louisiana oil, gas and natural gas liquids leader. With a $20 price target and an above average 7.50% distribution, Crosstex is another solid total return play for investors. The consensus price target is $19.
Genesis Energy L.P. (NYSE: GEL) operates three segments in the Gulf Coast region of the United States. The Pipeline Transportation, Refinery Services and the Supply and Logistics segments keep revenues consistent and growing. The Credit Suisse price target is $52 and the company pays a 4.30% distribution. The consensus price target is $47.
DCP Midstream Partners L.P. (NYSE: DPM) recently strengthened their cash position with a $500 million 10-year bond offering. The company has a $47 price target and pays investors a solid 6.10% distribution. The consensus estimate is at $48.50.
Based in Oklahoma City, Access Midstream Partners L.P. (NYSE: ACMP) is the former Chesapeake Midstream Partners. It has a focus on natural gas and natural gas liquid operations. The Credit Suisse price target for this popular name is $42. Investors receive a 4.50% distribution. The consensus target is in line at $41.
The final name on the list of stocks to buy for the next 12 months is Tesoro Logistics L.P. (NYSE: TLLP). It has multiple income streams from crude oil gathering, terminalling, plus transportation and storage. The target price for Tesoro Logistics is $57. The company pays modest 3.60% distribution. The consensus target is $53.
MLP stocks have posted a solid first quarter this year, after underperforming the market in 2012. Investors looking for growth and income stocks may want to review their portfolios and see if they have investments that would suffer in the event of interest rates increases. If so, they may want to swap in to some of these top MLP picks.
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