Penn Virginia: High Dividend Stocks With Strong Earnings

Includes: PVAHQ, PVG, PVR
by: Double Dividend Stocks

Penn Virginia Resources Partners LP. (NYSE:PVR), and its general partner PVG, both reported strong Q$ 2009 earnings and dstributable cash flow growth this week (see PVR conference call here). Both PVR and PVG are among the high dividend paying stocks listed in the Basic Materials section of our High Dividend Stocks by Sector tables.

PVR reported the following '09 quarter over '08 quarter results:

2009 Q4

2008 Q4

Net Income



Adjusted Net Income



Distributable Cash Flow

$48.3 million

$35 million

Midstream Gross Margin



CEO James Dearlove attributed the firm's increased earnings to

much higher fractionation, or “frac spreads” for PVR Midstream due to higher natural gas liquids (NGLs) prices, and continued low natural gas costs. We also enjoyed a full quarter’s benefit from the acquisition of a processing plant and expanded capacity in our largest system, the Panhandle system, which allows us to process gas volumes, which were previously being bypassed and processed by third parties. We anticipate system throughput and processed volumes will increase in 2010 as producers’ drilling activity increases as the result of an ongoing recovery in natural gas prices compared to relatively low 2009 levels.

Coal royalties revenue, net of coal royalties expense, (which generated about 83% of the Coal and Natural Resource Management segment’s 4th quarter revenues), was slightly higher, compared to Q3 2009, but was 12% lower than the Q4 2008. Other revenues, while 13% higher as compared to the third quarter, were 28% lower than Q4 2008, due to a year-over-year decrease in the prices of timber and natural gas.

PVR just paid a $.47/unit distribution, unchanged from 2009. This equals $1.88/unit annually, an 8.38% annual dividend yield. (PVR closed at $22.44 Friday). The dividend payout is well-covered, with distributable cash flow/unit of $.93 this quarter vs. a $.47/unit payout.

Although the next quarterly distribution won't be for 3 months, investors could also profit from PVR by selling put options. The August 2010 $20.00 put option is currently bid at $1.40, a 7% nominal yield, but a 13.5% annualized yield, on a 6-month-plus trade. This put option's breakeven is $18.60, which is 17% lower than the current $22.44 price.

PVG, the general partner of PVR, was founded in 1882. Through its subsidiaries, it owns 4,069 miles of natural gas gathering pipelines and 5 natural gas processing facilities, in addition to having approximately 827 million tons of coal reserves in Central and Northern Appalachia, the San Juan Basin, and the Illinois Basin. PVG also had good earnings, coming in at $.32/unit vs. $.24 a year ago. Distributable cash flow was unchanged, and PVG paid a $.38/unit dividend on February 2nd, a 9.2% dividend yield. There are no options available for PVG.

Corporate structure: Penn Virginia Corp. (PVA) owns 51% of PVG, which is the general partner and largest unit-holder of PVR.

Disclosure: No positions