"Some days you are the windshield, some days you are the bug."
It's always good to start the trading week by getting positive comments/catalysts on a couple of your core positions within your income portfolio. These positives were directed at two of the energy MLPs that make up a core portion of the yield generating part of my brokerage account. They are outlined below along with a synopsis of why I believe these two high yielders have further to climb.
Plains All American Pipeline, L.P. (PAA) through its subsidiaries, engages in the transportation, storage, terminalling, and marketing of crude oil, refined products, and liquid petroleum gas products in the United States and Canada.
4 reasons PAA still has a place in your income portfolio at $47.50 a share:
- The company just announced it is raising its distribution payout by just under ten percent (9.8%) Y/Y and is upping the midpoint of its guidance for EBITDA in 2013 by 5%.
- The company has beat earnings estimates five of the last six quarters and consensus earnings estimates have gone up nicely over the past two months.
- After the latest distribution increase, PAA yields more than 5% and has more than doubled its payouts over the last decade by frequent and consistent distribution raises.
- The company recently bought $125mm of storage assets from Chesapeake Energy (CHK). It also spent $500mm recently to buy crude oil rail terminals which I think is good strategic move given oil moved by rail improved better than 40% in 2012 as pipelines have failed to keep up with the huge increase in domestic oil production. Analysts expect six percent sales growth after almost 15% sales increases in FY2012.
Linn Energy, LLC. (LINE) is an independent oil and natural gas company which engages in the acquisition and development of oil and gas properties.
4 reasons LINE is a great income play at under $37 a share:
- Scott Black of Delphi (a member of Barron's roundtable) came on CNBC pre-market this morning and listed LINE as one of his best value plays. He stated it has a breakup value of $40 to $45 a share and you get paid a huge dividend to wait while the company unlocks value.
- LINE yields almost eight percent (7.9%) and has increased its payout by approximately 120% since it came public less than 7 years ago.
- The 13 analysts that cover the stock have a median price target of $44 a share, good capital appreciation potential for such a high yielder. Price targets are in a relatively tight range (Low: $41, High: $49).
- The stock is selling at just over a solid technical support range (See Chart) and almost 100% of its oil & gas production is hedged at higher prices over the next two years.