Genesis Energy - It's Like Christmas In November With This 6% Yielder

| About: Genesis Energy, (GEL)

No passion so effectually robs the mind of all its powers of acting and reasoning as fear -- Edmund Burke

Stocks that have had huge run-ups over the last year or so and high-dividend stocks continue to sell off post-election, as investors avoid the higher capital gains and dividend taxes coming in 2013. This pullback provides numerous opportunities. The position of income investors who were prudent or fortunate enough to now have plenty of cash on hand are in a particularly strong position. Many high-quality income plays are selling at a nice discount to where they were two weeks ago. It's like Christmas in November.

For my own income portfolio, I continue to favor some of the high-yielding MLPs that are building/maintaining our rapidly growing domestic energy infrastructure. First, distributions from MLPs are considered return of capital, so they should be unaffected by increased dividend taxes. Second, there are no current plans on the table to change the tax treatment of these vehicles.

Significant increases in domestic oil and natural gas production has been one of few bright economic accomplishments over the last six to eight years. There are numerous opportunities to benefit from this expansion with investments that offer high yield and solid growth prospects. One MLP I like at these levels is detailed below.

Genesis Energy, L.P. (NYSE:GEL) operates in the midstream segment of the oil and gas industry in the Gulf Coast region of the United States. It operates through three divisions: Pipeline Transportation, Refinery Services, and Supply and Logistics.

Here are six reasons why GEL still is a solid income play at $32 a share:

  1. GEL is yielding almost 6% (5.9%) and the company has more than doubled its distribution payouts over the last five years.
  2. Earnings are moving up rapidly. The company made just 89 cents a share in FY 2011 but is on track for a $1.16 a share in profits this fiscal year. Analysts have the company making over $1.50 a share in FY 2013.
  3. Consensus earnings estimates for both FY 2012 and FY 2013 have risen over the last month, even as the shares have fallen more than 5% along with the overall market in the last two weeks.
  4. Revenue growth is impressive. Genesis should have over 20% sales growth in FY 2012 and analysts expect over 15% revenue growth in FY 2013.
  5. Genesis' numerous assets are primarily located in the U.S. Gulf Coast region and are well positioned to benefit from the expected surge in crude production for the rest of the decade.
  6. Analysts are positive on the shares. The median price target held by the 11 analysts who cover the stock is $37 a share. Barclays initiated the shares as an "overweight" in late October. Credit Suisse similarly initiated the shares as an "overweight" in late September.

Bottom Line: Genesis has good capital appreciation potential on top of an almost 6% yield.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GEL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.