Encore Energy: Solid High Dividend Energy Limited Partnership

Encore Energy's (ENP) 12%-plus dividend yield puts it near the top of the heap for solid, high dividend stocks in our Energy Sector Dividend Table .

Formed in 2007, and primarily based in the West and Midwest, ENP's assets consist mainly of producing and non-producing oil and natural gas properties in the Big Horn Basin in Wyoming and Montana, the Williston Basin in North Dakota and Montana, the Permian Basin in West Texas, and the Arkoma Basin in Arkansas.

ENP also ranks very high vs. its Oil/Gas Drilling/Exploration peers for many other metrics:

Encore Energy vs. Oil/Gas Drilling/Exploration Industry

	ENP	Oil/Gas Drill'g/Explr'g Industry
P/E	2.96	10.32
P/CASH FLOW/SHARE	3.34	5.16
ROE	65.60	2.27
ROA	33.03	2.15
PROFIT MARGIN	154.92%	6.45%

The company recently said that its annualized distribution rate will increase from $2.05 per unit for the second quarter of 2009 to $2.15 per unit beginning with the distribution for the third quarter of 2009.

There are also covered calls and put options available for ENP. The March $17.50 call, (ENPCW), currently has a big bid/ask spread $.45/$.95, so your call premium yield could vary quite a bit. At $.45, it may not make sense to sell a call option, since it pales in comparison with the $1.075 dividend per share you'd get during this period.

The March $15.00 put, (ENPOC), has a bid/ask spread of $.95/$1.15.

We've also profiled one of ENP's peers recently, EV Energy Partners, (EVEP) another company with strong financials.

If you're looking for steady dividend paying stocks, ENP and EVEP deserve a closer look. Like many other energy stocks, these two have run up considerably during the rally, so you may want to buy on the dips.

Disclosure: Author doesn't own shares of ENP or EVEP currently.

Comments

[zorro6204:]

Your conclusions are correct, ENP is one of the more efficient and financially stable MLP's. But using GAAP numbers can be very misleading. Depletion is one reason (for a producer), older properties still producing could be completely written off, whereas earnings from a newly purchased property would be heavily impacted. GAAP earnings can also be heavily distorted by the accounting treatment for derivatives used for hedging.

For comparing MLP's, the appropriate financial metrics are cash flow (distributions and coverage, or dcf), reserve life and net leverage, measured in relation to cash flow for commonality.

Oct 09 09:51 AM