As a stay-at-home mom and income-driven investor, there are several criteria I like to establish before narrowing down the search for what I consider to be a top dividend pick. In this article I wanted to examine two small-cap energy firms that are currently in an uptrend, yield at least 8.50%, possess a forward P/E ratio at-or-under 16, and have a market cap under $2.0 billion.
#1 PetroLogistics, LP (PDH) - On Wednesday shares of PDH, which currently possess a market cap of $1.90 billion, a P/E ratio of 41.36, a forward P/E ratio of 9.45, and a forward yield of 8.79% ($1.20), settled at $13.65. Based on Wednesday's closing price, shares of PDH are trading 4.92% above their 20-day simple moving average, 4.97% above their 50-day simple moving average, and 5.99% above their 200-day simple moving average. These numbers indicate a short-term, mid-term, and long-term uptrend for the stock, which generally translates into a buying mode for traders. It should be noted that the company's dividend distribution has been updated, and that it intends on paying a dividend of $0.30/unit for the June quarter.
During the second quarter, PetroLogistics not only demonstrated strong sales but managed to weather an unexpected storm as an outage during the month of June impacted near-term profitability. Even though the company missed street estimates by the slightest of margins in terms of revenue ($159.4 million vs. estimates of $159.92 million), I still think the company had a fairly productive quarter. According to the company's President and Chief Executive Officer, Nathan Ticatch, "Propane-to-propylene spreads were at generally healthy levels over the course of the quarter, even though an unplanned outage during the month of June negatively impacted results."
Even in the wake of a significant outage, the partnership still managed to recognize total sales of $159.4 million during the quarter, which included propylene sales of $156.0 million. If the company can continue to demonstrate strong sales growth and improved earnings over the next 12-18 months, I see no reason why PDH should not be at least considered an option for one's near-term income-driven portfolio.
#2 QR Energy, LP (QRE) - On Wednesday shares of QRE, which currently possess a market cap of $997.07 million, a P/E ratio of 27.97, a forward P/E ratio of 15.15, and a forward yield of 11.43% ($1.95), settled at $17.06. Based on Wednesday's closing price, shares of QRE are trading 1.22% above their 20-day simple moving average, 0.94% above their 50-day simple moving average, and 0.21% above their 200-day simple moving average. These numbers indicate a short-term, mid-term, and long-term uptrend for the stock, which generally translates into a buying mode for traders. It should be noted that the company's dividend distribution has increased 18% since the company went public in December 2010.
One of the reasons I'm most attracted to QR Energy is the fact that the company possesses an aggressive nature when it comes to acquisitions. For example, my fellow SA colleague Bret Jensen points out that, "Since going public in late 2010, the company has done around $1.2B in accretive acquisitions, of which two thirds or so, have been drop downs from its sponsor, Quantum Resources Fund." On July 1, QRE demonstrated its aggressive strategy once again when it had agreed to acquire oil properties from an undisclosed private seller for $110M. The acquisition will be immediately accretive to distributable cash flow and the property carries an estimated total of nearly 6M boe in proved reserves (99% of which are considered to be proved-developed and another 92% which contain oil).
If the company can continue to demonstrate a strong appetite for acquisitions over the next 12-18 months, and steadily raise its dividend in the process, I see no reason why QRE should not be given top consideration by most any income-driven investor.