Energy
4 Energy Stocks With Huge Yields May Be the Best Sector Play Now
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It looked like a clear road to $80 a barrel, and if you believe what the financial press was reporting, that is exactly where Saudi Arabia and many of the OPEC nations want the price of oil to go. However, the president has backed out of the Iran deal and once again imposed sanctions which curtail the oil exports from that country, and Venezuela’s situation is a mess, as that country’s output has dropped to the lowest levels in 28 years.
With OPEC countries and Russia promising to replace that missing production, and a huge stockpile build, the price of oil dropped a whopping 4% last Friday to under the $70 mark. In addition, oil stocks, which had been on a roll, got hammered, as trigger-happy investors were more than happy to take some of the big gains they have posted this year. While oil has bounced some this week, it remains well under $70 a barrel.
The good news for 24/7 Wall St. readers looking to add in energy positions is that some of the best plays also may be among the highest yielding in terms of dividends and distributions. We found four that are all rated Buy by top Wall Street firms.
Energy Transfer Partners
This company merged with Sunoco Logistics Partners last year to form one of the largest master limited partnerships (MLPs). Energy Transfer Partners L.P. (NYSE: ETP) engages in the natural gas midstream and intrastate transportation and storage businesses in the United States.
The company’s Intrastate Transportation and Storage segment transports natural gas from various natural gas producing areas, and through ET fuel system and HPL system. It owns and operates 7,500 miles of natural gas transportation pipelines and three natural gas storage facilities in Texas. Its Interstate Transportation and Storage segment provides natural gas transportation and storage services; owns and operates approximately 12,300 miles of interstate natural gas pipeline; and has interests in various natural gas pipelines.
The Midstream segment gathers, compresses, treats, blends, processes and markets natural gas. It owns and operates 35,000 miles of in service natural gas, 31 natural gas processing plants, 21 natural gas treating facilities and four natural gas conditioning facilities.
Energy Transfer unitholders are paid a massive 11.81% distribution. The Merrill Lynch price target for the stock is $21, though the Wall Street consensus was last seen at $23.80. The shares closed at $19.14 on Wednesday.
Golar LNG Partners
This liquefied natural gas (LNG) shipping and storage play holds a big distribution for shareholders and is the top pick across Wall Street. Golar LNG Partners L.P. (NASDAQ: GMLP) owns and operates floating storage regasification units (FSRUs) and LNG carriers under long-term charters in Brazil, the United Arab Emirates, Indonesia and Kuwait. The company also engages in the leasing of its fleets.
The Marshall Islands–based company has a fleet of six FSRUs and five LNG carriers, a combined average remaining useful life of 25 years, and an average remaining charter duration of five-plus years. The company posted solid second-quarter results and also was successful in lowering leverage.
Golar LNG Partners has a diverse pipeline that includes its FLNG projects and, as a result, some Wall Street analysts feel the company has the largest growth potential over its peer group, with potential drop-downs/newbuilding inventories of 16 vessels.
Golar shareholders are paid a hefty 11.36% distribution. Merrill Lynch has a price target of $26 on the shares, while the posted consensus target is $23.39. The stock closed trading on Wednesday at $20.34 a share.
24/7 Wall St.PermRock Royalty Trust
This company recently had an initial public offering and is a great bet for investors looking for Permian Basin energy exposure. PermRock Royalty Trust (NYSE: PRT) was formed to own a perpetual interest in oil and gas producing properties. The company was established in 2017 through a trust agreement between Boaz Energy II and Simmons Bank.
Pursuant to the indenture, Boaz Energy conveyed to the trust an 80% net profits interest carved out of a subset of Boaz Energy’s oil and gas leasehold and royalty interest in the Permian Basin of West Texas. This net profits interest is the principal asset of the trust.
Owning PermRock Royalty’s units gives investors direct exposure to the Permian Basin with a monthly distribution and a 1099 status for taxes but without the risk of dilution to unitholders, additional leverage and acquisition of additional acreage. Boaz Energy’s interests are directly aligned with unitholders through a retention of 5.9 million units and a 20% direct interest in net profits of the underlying properties.
Investors in PermRock Royalty are paid a giant 12.53% distribution monthly. Numerous firms recently started coverage of the shares with a Buy rating. UBS was one, and it has a $21 price target. No consensus target was currently available. The shares closed most recently at $15.89 apiece.
24/7 Wall St.Summit Midstream
This company has hit our insider buying screens numerous times over the past two years. Summit Midstream Partners L.P. (NYSE: SMLP) focuses on owning, developing and operating midstream energy infrastructure assets primarily shale formations, in North America. The company provides natural gas gathering, treating and processing services pursuant to primarily long-term and fee-based gathering and processing agreements with customers and counterparties in five unconventional resource basins.
Since going public in 2012, the company has continued increasing its distribution as the result of a number of acquisitions and investments that grew its footprint across most of the major shale plays. The company recently guided 2018 in line with expectations, and it should be another year of smooth growth and consistent distributions.
Summit investors enjoy a huge 14.2% distribution. The $22 Baird price target compares with a posted consensus target of $17.67, as well as the most recent closing share price of $16.20.
Huge payouts that have remained consistent, along with the ability for the share prices to go higher, make these solid plays for more aggressive income accounts looking for energy exposure.
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