5 MLP Sizzlers Yielding As Much As 15%, Part II

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 |  Includes: BPL, EEP, ETE, KMP, PAA
by: Tactical Investor

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This is part II of this series; Part I featured MLPS such as Niska Gas Storage Partners LLC (NYSE:NKA) and Energy Transfer Partners LP (NYSE:ETP) with yields as high as 15%. MLPS combine the tax advantage of partnership and the prospect of higher dividends and can be traded like stocks. Unlike corporations MLPS are not subject to double taxation. In coming up with this list, we looked for the following 4 factors:

  1. A dividend payment history of 5 or more years, or 4 years or more of increasing the yearly dividend.
  2. A market cap of $5 billion or higher. Large cap stocks are generally more stable than their small cap counterparts.
  3. Operating cash flow (OCF) of $150 million or more. OCF is generally a better metric than earnings per share because a company can show positive net earnings and still not be able to properly service its debt; the cash flow is what pays the bills.
  4. A Yield of 5.7% or higher.

While we did not use it as a filter, we will highlight companies that had positive levered free cash flows. Levered free cash flow is the amount of cash available to stock holders after interest payments on debt are made. A company with a small amount of debt will only have to spend a small amount of money on interest payments, which in turn means that there is more money to send to shareholders in the form of dividends and vice versa.

Earnings can often be manipulated via accounting gimmicks, but it’s much harder to fake cash flow. As a result, many investors feel that free cash flow (NYSE:FCF) provides a better picture of a company’s ability to generate cash. Negative FCF numbers do not necessarily bode badly for the company in question, for it could be a sign that a company is making large investments, which could lead to big payoff in the future.

Out of the five companies below, only PAA and KMP have positive levered free cash flows. This is not necessarily a bad thing; for example, even though BPL has a negative levered free cash flow, it has a history of increasing dividends for over 15 years.

Stock

Dividend

Market Cap

Forward PE

Cash per share

Total Cash

Operating margins

Revenue

Operating

Cash flow

ETE

6.7%

8.1B

17.63

0.77

170M

15.62%

7.84B

1.26B

BPL

6.3%

5.97B

18.38

2.49

16M

7.3%

4.46B

178.43

EEP

6.8%

8.74B

20.12

2.3

443M

5.75%

9.2B

618M

KMP

6.00%

26.24B

34

3.38

277M

20%

8.13B

2.87B

PAA

6.00%

9.86B

15.9

0.10

15M

3.6%%

36.2B

1.55B

Click to enlarge

B = billions, M = millions.

Energy Transfer Equity LP (NYSE:ETE)

Energy Transfer Equity, L.P has a market cap of $7.94 billion an enterprise value of $19.96 billion and price/sales value of 1.0.4. The total cash it has amounts to $0.77 per share. Energy Transfer Equity, L.P has a levered free cash flow of -$566 million.

  • Short ratio 5.2%
  • Percentage held by institutions 24.5%
  • Percentage held by insiders 44%
  • ROE 7.98%
  • Quarterly earnings growth (yoy) N/A
  • Total debt $11.99 billion
  • 200 day moving average $39.64
  • Book value $0.23
  • Dividend rate $2.35
  • Payout ratio 198%
  • Dividend growth rate 5 year average 38.6%
  • Consecutive dividend increases 4 years
  • Paying dividends since 2006
  • Total return last 3 years 224%
  • Total return last 5 years 59.57%

Buckeye Partners LP (NYSE:BPL)

Buckeye Partners LP has a market cap of $ 5.82 billion and enterprise value of $ 8.5 billion. The total cash Buckeye Partners LP has amounts to $0.17 per share. Buckeye Partners LP has a levered free cash flow of -$63 million and a price/sales value of 1.31. Out of a possible five stars we would assign give Buckeye Partners LP a four star rating.

  • Short percentage of float 1.6
  • Percentage held by institutions 24
  • Percentage held by Insiders 11.88
  • ROE 5.6
  • Quarterly earnings growth (yoy) N/A
  • Total debt $2.75 billion
  • 200 day moving average $ 21.20
  • Book value $25.20
  • Dividend yield 5 year Average 7.60
  • Dividend rate $4.03
  • Payout ratio 209
  • Dividend growth rate 5 year average 5.88
  • Consecutive dividend increases 15 years
  • Paying dividends since 1990
  • Debt/equity ratio N/A
  • Total return last 3 years 171
  • Total return last 5 years 79

Enbridge Energy Partners (NYSE:EEP)

Enbridge Energy Partnershas a market cap of $ 8.2 billion and enterprise value of $ 13.36 billion. The total cash Enbridge Energy Partnershas amounts to $1.62 per share. Enbridge Energy Partnershas a levered free cash flow of -$420 million and a price/sales value of 0.89. Two insiders purchased shares in the company recently. On the 17th of November, Vice President Janet Coy purchased 5,000 shares at a cost of $30.12 for a total outlay of $15,058. John, Loiacono purchased 1,000 shares at a cost of $30.10 a share for $30,100.

  • Short percentage of float 0.9%
  • Percentage held by institutions 29%
  • Percentage held by Insiders 0.05%
  • ROE 10.23$
  • Quarterly earnings growth (yoy) N/A
  • Total debt $1.62 billion
  • 200 day moving average $ 29.16
  • Book value $13.03
  • Dividend yield 5 year Average 9.00%
  • Dividend rate $ 2.09
  • Payout ratio 212%
  • Dividend growth rate 5 year average 2.5%
  • Consecutive dividend increases 4 years
  • Paying dividends since 1992
  • Debt/equity ratio N/A
  • Total return last 3 years 203%
  • Total return last 5 years 60%

Kinder Morgan Energy Partners LP (NYSE:KMP)

Kinder Morgan Energy Partners LPhas a market cap of $ 25 billion and enterprise value of $ 38 billion. The total cash Kinder Morgan Energy Partners LP has amounts to $0.83 per share. KMP has a levered free cash flow of $265 million and a price/sales value of 3.07. Out of a possible five stars, we would assign Kinder Morgan Energy Partners LP four stars. Not many companies make it to the five-star category and most that do generally have yields below 6%.

  • Short ratio 1.9%
  • Percentage held by institutions 7.6%
  • Percentage held by Insiders 18%
  • ROE 15.97%
  • Quarterly earnings growth (yoy) -33
  • Total debt $13.62 billion
  • 200 day moving average $ 71.90
  • Book value $22.16
  • Dividend yield 5 year Average 7.10
  • Dividend rate $4.58
  • Payout ratio 93%
  • Dividend growth rate 5 year average 7.31%
  • Consecutive dividend increases 14 years
  • Paying dividends since 1992
  • Debt/equity ratio N/A
  • Total return last 3 years 93%
  • Total return last 5 years 97%

Plains All American Pipeline, LP (NYSE:PAA)

Plains All American Pipeline, L.Phas a market cap of $9.86 billion an enterprise value of $14.84 billion and price/sales value of 1.0.4. The total cash Plains All American Pipeline, L.Phas amounts to $0.77 per share. Plains All American Pipeline, LP has a levered free cash flow of $850 million, so it has plenty of money to send out to shareholders in the form of dividend payments. Out of a possible five starts we would assign Plains All American Pipeline, L.P four stars.

  • Short ratio 1.3%
  • Percentage held by institutions 37%
  • Percentage held by insiders 11%
  • ROE 17.34%
  • Quarterly earnings growth (yoy) 246.9%
  • Total debt $5.16 billion
  • 200 day moving average $62.03
  • Book value $32.33
  • Dividend rate $3.91
  • Payout ratio 93%
  • Dividend growth rate 5 year average 6.43
  • Dividend 5 year average 7.2%
  • Consecutive dividend increases 11years
  • Paying dividends since 1999
  • Total return last 3 years 122%
  • Total return last 5 years 64%

Conclusion

Kinder Morgan Energy Partners LP and Plains All American Pipeline have strong levered free cash flows and should have no problems maintaining their dividend payments; this clearly evidenced from the fact that they both have increased dividend payments for over 10 years.

From a technical perspective, Kinder Morgan Energy Partners LP looks very strong, as it has managed to surge to new highs and held up very well in this volatile environment. However, I would wait for a pullback before opening any new positions. Energy Transfer Equity LP is trading well below its 200-day moving average and will remain weak under $38.

If it were to retest $32, it could make for a good play as long as it does not close below this level on a weekly basis. A close below $32 on a weekly basis would most likely lead to a new 52-week low. On the other hand, If Energy Transfer Equity LP closes above $38 on a weekly basis, it would have a real chance of testing the $46-$48 range.

Plains All American Pipeline, L.P is holding up very well and trading close to its highs. Plains All American Pipeline, LP could potentially put in a double top formation, if tests its recent high but is unable to close above it. The recent intra day high is $66.80 and the closing high is $66.52. A double top formation is generally viewed as a bearish development. I would wait for a pullback before opening up positions in Plains All American Pipeline LP.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: Do not treat this as a buying list. It is very important that you check the finer details in each of the mentioned plays before investing any capital in them. The Latin maxim caveat emptor applies -- let the buyer beware.