Memorial Production Partners: An 11% Yielder To Add To Your Income Portfolio

Dec.25.12 | About: Memorial Production (MEMP)

Although I am not positive on the short term prospects of the market for a variety of reasons, I am adding to the high yielding energy plays within my income portfolio on any pull back. One of the places I put some new money into Friday is Memorial Production Partners (NASDAQ:MEMP).

Key recent positives for MEMP:

  • Citigroup reiterated its "Buy" rating on MEMP this week and raised its price target slightly to $20.50 from $20.
  • The company's recent new issue offering was oversubscribed. This will help pay for a recent $271mm acquisition from Irving-based Rise Energy Partners LP.
  • The stock recently entered oversold territory.
  • Consensus earnings estimates for both FY2012 and FY2013 have risen significantly over the past thirty days.

Memorial Production Partners, L.P develops and produce oil and natural gas from its properties in Texas and Louisiana.

4 additional reasons MEMP is a good addition to your income portfolio at $17 share:

  1. MEMP yields 11.3% which has a good chance of increasing over time as it integrates the production and cash flow from the recent acquisition referenced in previous bullet points.
  2. The mean price target of the five analysts that cover the stock is $21.70 a share. Price targets range from $20.50 to $24 a share.
  3. Mainly due to its recent acquisition, revenue is projected to shoot up more than 80% in FY2013 after increasing more than 20% in FY2012.
  4. MEMP sells for a very reasonable 10x forward earnings for such a high yielder and the company has grown operating cash flow by over 100% in the last two fiscal years.

Disclosure: I am long MEMP. 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.