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As 13% of recent insider activity has taken place in the basic material sector, we thought it would be a good idea to look for some companies that offered attractive yields.

In a prior article we featured 3 great material plays paying dividends as high as 8.3%. Two of the names mentioned in that article were SeaDrill LTD (NYSE:SDRL) and Southern Copper Corp (NYSE:SCCO), with yields of 6.5 and 9.3%, respectively. Interestingly, since that article was published, SCCO now offers a higher yield than SDRL.

In coming up with this list, we looked for the following factors:

  • Return on Equity (ttm) of at least 10.
  • Experienced some insider activity in the past 5 months, or the purchase of 1 million or more shares by a beneficial owner.
  • Quarterly revenue growth (yoy) of at least 25% or Quarterly earnings growth (yoy) of at least 23%.
  • Operating cash flow of at least $200 million.
  • Yield of 3% or higher.
  • Total 3-year return of 80% or higher. The only exception to this rule was LYB, and it was included because of its strong levered cash flow rate of $880 million and very strong quarterly earnings growth (yoy) rate of 88%

We also included information on free levered cash flow rates as it provides investors with a better picture of the company's ability to generate cash as opposed to EPS. Earnings can be manipulated through the use of accounting gimmicks, but it's much harder to fake cash flow. 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 modest 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.

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 payoffs in the future. In this instance, we do not need to highlight the MLPS as all of them have positive levered free cash flow rates. The top three companies in this category are LyondellBasell Industries N.V. (NYSE:LYB), Linn Energy (NASDAQ:LINE) and Western Gas Partners, L.P. (NYSE:WES).

Stock

Dividend

Market Cap

Forward PE

Price/ book

Qtrly Revenue Growth (yoy)

Qtrly Earnings Growth (yoy):

Operating cash flow

Levered free cash flow

EEP

6.8%

8.36B

19

2.3

25%

N/A

618M

-420M

WES

4.10%

3.5B

29

2.3

42%

20%

262M

161M

LINE

7.20%

6.6B

17

1.8

32

20,117.9%

573M

189M

WTI

4.00%

1.65B

11.3

2.95

44.7%

94.7%

467M

-286M

LYB

3.00%

19.1B

6

1.37

29%

88%

3.5B

888M

B= billion; M= Million.

Enbridge Energy Partners owns and operates crude oil and liquid petroleum transportation and storage assets, in the United States. Transporting oil is one of the biggest opportunities in the Bakken shale area. The roads in the Williston Basin are not sturdy enough to support a constant fleet of truck transporting oil day and night, so this provides an immense opportunity for pipeline companies. EEP is moving in the right direction by expanding its capacity to handle an additional 80,000 barrels of oil.

Enbridge Energy Partners LP will make an additional $145 million investment in North Dakota to expand crude oil capacity and add a rail car loading facility to accommodate the additional volume, the company said Tuesday. The Houston-based petroleum company, which operates oil pipelines, said that it will increase the holding capacity at the Berthold terminal by 80,000 barrels per day and add a double-loop unit-train facility, oil tanks and other terminal facilities next to its existing facilities. Enbridge Energy Partners has contractual commitments for 70 percent of the rail loading capacity and anticipates it will soon finalize agreements for the remaining capacity. The project is expected to be ready by 2013.

Insider Action

On Nov. 17, Vice President Janet Coy purchased 500 shares at $30.12 per share for a total outlay of $15,058. John, Loiacono purchased 1,000 shares at $30.10 per share for $30,100.

Officer J. Letwin purchased 20,000 shares in September at $54.71-$54.81 per share for a total cost of $ 1,095,000.

  • ROE 10.23%
  • Total debt $5.61 B
  • 200 day moving average $ 29.12
  • Book value $13.03
  • Dividend yield 5 year Average 8.8
  • Dividend rate $ 2.09
  • Payout ratio 212
  • Dividend growth rate 5 year average 2.5%
  • Consecutive dividend increases 4 years
  • Paying dividends since 1992
  • Total return last 3 years 188%
  • Total return last 5 years 61.8%

Western Gas Partners LP

WES has a levered free cash flow of $161 million and a price/sales value of 5.37. Dividend payments amounted to $94million so it should have no problem making dividend payments as the levered free cash flow is well in excess of these payments. It has only been paying dividends for 4 years, but has already increased dividends for two years in a row.

Insider Action

Donald Sinclair purchased 2,789 shares at $35.86 on the 23rd of September for roughly $100,000. On the same day Director J, Rea purchased 2,091 shares at $35.86 a share for roughly 75,000. Director R.Crane purchased 129,400 shares in August at $33.90 a share for a total cost of $ 4,386,66o. Director R. Crane previously purchased 126,754 shares in March at $33.15 per share, for a total cost of $4,455,403

  • ROE 12.27%
  • Total debt $669M
  • 200 day moving average $ 35.23
  • Book value $16.55
  • Dividend yield 5 year Average N/A
  • Dividend rate $ 1.60
  • Payout ratio 93%
  • Dividend growth rate 3 year average 65.4%
  • Consecutive dividend increases 2 years
  • Paying dividends since 2008
  • Total return last 3 years 285%
  • Total return last 5 years N/A

Linn Energy, LLC, an independent oil and natural gas company, engages in the development and acquisition of oil and gas properties in the United States. LINE has a levered free cash flow of $189 million and a price/sales value of 8.41 and incredible quarterly earnings growth (yoy) rate of 20,117.90%.

Insider Action

There have been several purchases in the month of August. The most notable purchases were made by Director S. Jacobs. Director S. Jacobs has purchased 25,000 shares directly and indirectly in August at $32.76-$34.00 per share.

  • ROE 11.94%
  • Total debt $3.12B
  • 200 day moving average $ 37.51
  • Book value $21.00
  • Dividend yield 5 year Average 11.2%
  • Dividend rate $ 2.76
  • Payout ratio 169%
  • Dividend growth rate 5 year average 22.45%
  • Consecutive dividend increases 1 years
  • Paying dividends since 2006
  • Total return last 3 years 305%
  • Total return last 5 years 81%

W&T Offshore Inc.

W&T Offshore, Inc. is an independent oil and natural gas producer engaged in the acquisition, exploitation, exploration and development of oil and natural gas properties primarily in the Gulf of Mexico. WTI has a levered free cash flow rate of -$286 million and a price/sales value of 1.80 and quarterly earnings growth (yoy) rate of 94%. Insiders have a 53% stake in the company.

Insider Action

Director B Katz purchased 5000 shares at $17.74 in the month of November for a total cost of $88,699. Director I. Israel purchased 2250 shares in November at $17.70 a share for a total cost of roughly $39,000. Director Frank Stanley purchased 2500 shares in November at $17.59 a share for a total cost of roughly $44,000. Director G. Gibara purchased 2220 shares in November at $18.06 per share for a total outlay of $40.575. Additional transactions can be viewed by clicking on the table below.

  • ROE 29.5%
  • Total debt $694M
  • 200 day moving average $ 21.12
  • Book value $7.38
  • Dividend yield 5 year Average 2.60%
  • Dividend rate $ 0.16
  • Payout ratio 50%
  • Dividend growth rate 5 year average 194%
  • Consecutive dividend increases 1 years
  • Paying dividends since 2005
  • Total return last 3 years 107%
  • Total return last 5 years -31%

LyondellBasell Industries NV

LyondellBasell Industries NV is a Netherlands-based company engaged in the chemical industry. LYB has a very strong levered free cash flow of $883 million and a price/sales value of 1.37. A special dividend of $4.50 was announced on the 22nd of November and will be paid on the 16h of December. LYP has a trailing dividend yield of almost 15%.

Insider Action

Apollo Management Holdings GP, LLC, was actively purchasing shares in the month of November. In total, it purchased roughly 5 million shares at a cost of $28.60-$34.99 a share.

The full list of insider transactions can be accessed here.

  • ROE 24%
  • Total debt $5.83
  • 200 day moving average $ 34.21
  • Book value $24.65
  • Dividend yield 5 year Average N/A
  • Dividend rate $ 0.73
  • Payout ratio 94%
  • Dividend growth rate 3 year average N/A
  • Consecutive dividend increases 0 years
  • Paying dividends since 2011
  • Total return last 3 years N/A
  • Total return last 5 years N/A

Insider transactions were sourced from Yahoo Finance.

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.

Source: 5 Great Materials Plays With High Yields And Insider Buying