Energy
Get Over 10% Dividends and Huge Total Return Potential With These 2 MLPs
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Oil has rallied back nicely after an awful August, which saw a big pullback in the black gold. The good thing for most oil producers is that with oil over the $60 a barrel mark and closing in on the $70 level, many are able to wring out very solid profits at these prices. The good news for investors is that energy master limited partnerships (MLPs) offer a somewhat safer way to play the sector and also pay out some sizable distributions.
We screened the 24/7 Wall St. MLP research universe looking for companies with the highest yields, and found two top choices for investors looking for energy exposure and huge income payouts. Remember that no single analyst call should ever be used as a basis to buy or sell a stock.
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CrossAmerica Partners
This high-yielding gem offers investors among the highest MLP dividends out there. CrossAmerica Partners L.P. (NYSE: CAPL) engages in the wholesale distribution of motor fuels, operation of convenience stores and ownership and leasing of real estate used in the retail distribution of motor fuels in the United States.
The company operates in two segments. The Wholesale segment engages in the wholesale distribution of motor fuels to lessee dealers, independent dealers, commission agents and company-operated retail sites. The Retail segment is involved in the sale of convenience merchandise items and retail sale of motor fuels at company-operated retail sites and retail sites operated by commission agents. As of March 1, 2021, the company distributed fuel to approximately 1,700 locations and owned or leased approximately 1,100 sites.
Shareholders receive a 10.84% distribution. RBC Capital Markets has a Sector Perform rating and an $18 price target on the shares. That compares with the $17.00 consensus target and Thursday’s closing price of $19.38 a share.
Global Partners
This stock has backed up in price and is offering an incredible entry point. Global Partners L.P. (NYSE: GLP) engages in the purchasing, selling, gathering, blending, storing and logistics of transporting gasoline and gasoline blendstocks, distillates, residual oil, renewable fuels, crude oil and propane to wholesalers, retailers and commercial customers in the New England states and New York.
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The company is also involved in the transportation of petroleum products and renewable fuels through rail from the mid-continent region of the United States and Canada. Its Wholesale segment sells home heating oil, branded and unbranded gasoline and gasoline blendstocks, diesel, kerosene, residual oil and propane to home heating oil and propane retailers and wholesale distributors. It also aggregates crude oil through truck or pipeline in the mid-continent region of the United States and Canada, as well as transports it through rail and ships it through barge to refiners.
The Gasoline Distribution and Station Operations segment sells branded and unbranded gasoline to gasoline station operators and sub-jobbers, and it operates gasoline stations and convenience stores. The segment provides car wash, lottery and ATM services, as well as leases gasoline stations.
Its Commercial segment sells and delivers unbranded gasoline, home heating oil, diesel, kerosene, residual oil and bunker fuel to end-user customers in the public sector, as well as to commercial and industrial end users. It also sells custom blended fuels.
As of December 31, 2020, the company had a portfolio of 1,548 owned, leased or supplied gasoline stations, which included 277 directly operated convenience stores. It owned, leased or maintained storage facilities at 25 bulk terminals, with a collective storage capacity of 11.8 million barrels.
Investors receive a 10.95% distribution. Wells Fargo has an Underweight rating, and its price target of $23 is just above the $22 consensus figure. The stock closed on Thursday at $20.10 per share.
Typically at 24/7 Wall St., we focus on stocks with Buy ratings, but the giant and seemingly secure distributions these companies pay offer investors with higher risk tolerance some very appetizing total return potential. Plus, it makes sense that if they were going to cut their distributions, it would have happened a long time ago. It should be noted that MLP distributions can contain return of principal.
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