Energy MLPs occupy a good portion of the allocation I have on the income side of my portfolio. I believe they are well positioned to operate in the coming environment of stagflation, which I see as a natural result of our recent fiscal and monetary policies. They also have a secular tailwind, as we continue to substantially increase our domestic energy production.
One of the entities I profiled and bought in December at $32 a share has shot up to $37 in the six weeks since the article ran. It is Access Midstream Partners (ACMP), and based on recent catalysts I still believe the shares have further to run.
Here are some recent positives for ACMP:
- It just announced that it is raising its distribution payout 15.4% to 45 cents a quarter.
- The CEO and a board member bought new shares in December.
- Deutsche Bank recently put out a positive report on the energy MLP space for 2013, and has ACMP on its Buy list in this area.
Access Midstream Partners is the industry's largest gathering and processing master limited partnership as measured by throughput volume and invested capital.
Here are four reasons why ACMP is a solid addition to an income portfolio at under $37 a share:
- With the recently announced dividend hike, the shares yield 5%. It has now more than doubled its payouts since it came public in late 2010.
- Consensus earnings estimates have risen significantly for FY 2013 over the last two months. Given that Access chose to announce the dividend hike several weeks before its earnings report, this probably indicates that the report will be solid.
- With its recent acquisitions and transactions detailed in my previous article, revenue is expected to increase almost 70% in FY 2013.
- ACMP has done an impressive job growing operating cash flow, tripling this metric over the prior three years.