Despite Strong First Quarter, UBS Still Very Positive on MLPs (AMJ, PNG, EROC, ACMP, GEL, ETE, UBS)

The MLP team at UBS point out that natural gas and oil from shale is triggering an evolution in the energy sector, and the MLPs are forecast to play a major role in this transformation. Aided by their existing infrastructure, access to lower cost capital and management expertise, the analysts believe MLPs will build-out the necessary infrastructure for oil transportation and storage and natural gas transportation, processing and fractionation capacity. Such infrastructure investments will be accretive to distributable cash flow which, in turn, should result in distribution growth well-above that of the overall market.

They list five top stocks investors can buy now despite the big advance.

PAA Natural Gas Storage L.P. (NYSE: PNG) kicks off the UBS list and is considered one of the undervalued small-cap names. Its revenues have grown smartly with the price of natural gas. The UBS price target for the stock is $21. The Thomson/First Call estimate is $20.50. Investors are paid a 6.70% distribution. We remind readers that MLP distributions may contain return of principal.

Eagle Rock Energy Partners L.P. (NASDAQ: EROC). With more than 8,000 miles of natural gas pipelines, this high-yielding name may be a total return winner. The UBS price target is $11. The Wall St. consensus estimate is $10.50. Investors are paid a hefty 9.10% distribution.

Access Midstream Partners L.P. (NYSE: ACMP) is a name we have seen on many firms’ top buy lists. The UBS price target is $46. The consensus estimate is lower at $41. Unitholders receive a 4.60% distribution.

Genesis Energy L.P. (NYSE: GEL) finds a spot on the UBS list of top names. Having just increased its cash distribution this week 10.6% yearly, this solid name has a record of consistent distribution increases. The UBS price target is $48 and the consensus price target is $47. The company pays a 4.30% distribution.

The final name to make the UBS list is Energy Transfer Equity L.P. (NYSE: ETE). Taking advantage of the strong market, the company recently completed a secondary stock offering. This often provides investors with a good entry point as the stock can trade down with the new supply. The UBS price target is $63. The consensus target is $64. Investors are paid a 4.50% distribution.

With interest rates likely to stay low for the foreseeable future, quality MLPs should continue to be among the best stocks for investor total return. With the growth of the U.S. energy complex gaining steam, earnings and revenue growth should stay strong.