"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. (NYSE: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 (NYSE: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. (NASDAQ: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.