Why I Sold Access Midstream Partners With Its Juicy 3.78% Dividend Yield

Feb.26.14 | About: Access Midstream (ACMP)

Access Midstream Partners LP (NYSE:ACMP) owns, operates, develops and acquires natural gas, natural gas liquids and oil gathering systems and other midstream energy assets and provides its services to producers under long-term fixed-fee contracts. On February 18, 2014, the company reported fiscal first quarter earnings of $0.47 per share which beat the consensus of analyst estimates by $0.04. The stock is up 60.21% excluding dividends in the past year (up 64.32% including dividends), and is beating the S&P 500, which has gained 21.76% in the same time frame. I recently sold ACMP out of my growth portfolio in exchange for Himax Technologies, Inc. (NASDAQ:HIMX). With all this in mind, I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to show why I've made the switch for my growth portfolio.

Fundamentals

The company currently trades at a trailing 12-month P/E ratio of 34.37, which is expensively priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 30.53 is currently expensively priced for the future in terms of the right here, right now. The 1-year PEG ratio (3.23), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is expensively priced based on a 1-year EPS growth rate of 10.65%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 17.33%. Below is a table of the fundamental metrics I look for in a company and shows how ACMP fares against HIMX. All data is as of 26Feb14.

Ticker

Price ($)

TTM P/E

Fwd P/E

EPS Next YR ($)

Target Price ($)

PEG

EPS next YR (%)

ACMP

58.75

34.37

30.53

1.89

28

3.23

10.65

HIMX

13.83

39.62

15.87

0.85

12.75

1.13

34.98

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Financials

On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 3.84% with a payout ratio of 132% of trailing 12-month earnings while sporting return on assets, equity and investment values of 4%, 7.5% and 4.3%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I believe the 3.84% yield of this company is good enough for me to take shelter in for the time being. The company has been increasing its dividends for the past 5 years. Below is a table of the financial metrics I look for in a company and shows how ACMP fares against HIMX. All data is as of 24Feb14.

Ticker

Yield (%)

Payout TTM (%)

ROA (%)

ROE (%)

ROI (%)

ACMP

3.84

132

4.0

7.5

4.3

HIMX

1.86

74

8.5

13.8

10.0

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Technicals

Click to enlarge

Looking first at the relative strength index chart [RSI] at the top, I see the stock is in overbought territory with a value of 69.2 with upward trajectory. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is above the red line with the divergence bars increasing in height, indicating some bullish momentum.

Conclusion

These are two completely different types of companies, and before you begin to chastise me for it, this article was not meant to be a comparison. I'm merely just displaying the data points for Himax. I sold ACMP for a 17.96% gain including dividends, and since making the switch, ACMP is up 5.25% against the 2.97% gain HIMX has posted. HIMX has indeed traded erratically, hitting gains of 10% and then falling to a 1% gain just a week later, and seems to be exhibiting that trend regularly. I just felt it was time to leave ACMP because the growth expectations from when I last wrote about it have deteriorated.

Fundamentally, I believe ACMP to be fairly valued based on 2015 earnings, but expensively priced based on future growth potential, and that is the main reason why I sold the stock. Financially, I'm giving up quite a bit of dividend, but I believe it is okay, because I like the capital appreciation opportunity much better with HIMX, not to mention management has better financial ratios all across the board. On a technical basis, ACMP may be hitting a short-term top. I will provide reports on how each is doing against each other as the future progresses.

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: I am long HIMX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.