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<< Return to Part II

This is Part III of the Pipeline series. The benefits of investing in pipeline stocks are similar to those of investing in a utility; the ability to generally generate stable cash flows. Once a pipeline company is up and running the operators enjoys stable cash flows from long-term contracts. Due to economic uncertainty and extremely volatile markets, more investors are moving away from speculating and gravitating towards income generating investments. The following filters were used in coming up with this list.

  • A dividend payment history of 4 or more years, or 5 years or more of increasing the yearly dividend.
  • A market cap of $1 billion or higher. Large cap stocks are generally more stable than their small cap counterparts.
  • Operating cash flow (OCF) of $70 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. The only exception is CQP and it was included on this list because it has landed 3 large multiyear deals that could significantly impact its earnings going forward.
  • A Yield of 4% or higher.
  • Quarterly revenue growth rate (yoy) of 12% or higher or a 3 year total return of 70% or higher.

We also listed the EV value of each company. EV value is a combination of the market cap, debt, minority interests, preferred shares less total cash and cash equivalents. This provides a better picture because it is a more accurate representation of a company’s value as opposed to simply looking at the Market cap.

OKS is among Credit Suisse’ top MLP picks for the year.

We would assign 3.5 stars out of a total 5 on all the plays except for CPQ. APL has a spectacular 5 year dividend growth rate of 60% , it has a quarterly revenue growth (yoy) rate of 53% and a ROE of 24%. . APL paid out a dividend of 54 cents on the 14ht of November, a 7 cent increase from its last payment of 47 cents. NS has a five year dividend growth rate of 4.19%, a total 3 year return of 72% and a quarterly revenue growth (yoy) rate of 60.3%. OKS has a ROE of 20.38%, a three 3 year total return of 160%, a quarterly revenue growth (yoy) of 40% and has increased its dividends for 5 years in a row. TRP is a Canadian dividend champion. It has increased its dividend by 8 cents consistently for the past 7 years and if this year were counted it would make 8. It has a quarterly revenue growth (yoy) rate of 12.4% and total return for the past 12 months of almost 18%.

Two other interesting pipeline plays are Kinder Morgan Energy Partners LP (NYSE:KMP) and Buckeye Partners LP (NYSE:BPL). KMP has a market cap of $ 26.3 billion and enterprise value of $ 39 billion. KMP has a levered free cash flow of $265 million and a price/sales value of 3.07 and quarterly revenue growth (yoy) 6%, a ROE of 15.97% and a five-year total return of 97%. It has been dividends since 1993 and has increased its dividend payment for 14 years. Its 5 year dividend growth rate is 7.31%, and its five-year dividend payment average is 7.10%.

BPL has a market cap of $ 5.92 billion and enterprise value of $ 8.5 billion. The total cash it has amounts to $0.17 per share. It has been paying dividends since 1990 and has increased them for 15 years. Its 5 year dividend growth rate is 5.88%, a quarterly revenue growth rate of (yoy) 52%, a total 3 year return of 122%and its five-year dividend payment average is 7.60%. Its total three year return is 171%, and its total 5-year return is 79%. However, we would assign KMP and BPL a total of 4-4.2 stars out of a possible five stars.

B= billion M= Million

Cheniere Energy Partners LP. (NYSEMKT:CQP)

It has enterprise value of $4. 81billion and price/sales value of 9.47 It has quarterly revenue growth (yoy) of -2.76% a total return of 385% for the past 3 years, and it has a levered free cash flow rate of $27 million; the only stock on the list with a positive levered cash flow rate.

This is the most speculative stock on the list but the two multiyear deals it has already signed and the brand-new one it signed with Gail India, which was announced on the 12th of December could mark a turning point for CQP. Thus even though it is the most speculative of the lot, it has the potential to be the biggest winner over the next 12 months. It already leads the pack in terms of dividend yields and the 5 year average yield is a whopping 15%. As long as it does not close below 12 on a weekly basis the outlook will remain neutral. If it can close above 18 on a weekly basis, it will have a real chance of challenging the 24 plus ranges.

Cheniere Energy Partners L P entered into two multibillion dollar contracts one with the BG Group this October valued at $8 billion supply 3.5 million tons per year of LNG from its Sabine Pass Liquefaction project. The second deal was signed with Spain’s gas Natural Fensoa for $9 billion to supply 3.5 million tons of LNG per year for 20 years with the option of extending it for another 10 years..

Cheniere Energy has signed a third long-term deal to export liquefied natural gas from its proposed plant in Louisiana, paving the way for the first U.S. export project of its kind in nearly 50 years. Cheniere will supply state-run Indian energy company Gail India Ltd with 3.5 million tonnes per year (mtpa) of LNG from Sabine Pass for 20 years starting in 2017, pending regulatory approval for the project, the two companies said in a statement. CQP has been bleeding for years and these two deals should help instill some confidence in investors because it provides CQP with means to refinance and or pay off some of its existing debt which is coming due in May 2012.

  • ROE N/A
  • Return on assets 5.15%
  • Total debt $2.19B
  • 200 day moving average $ 16.28
  • Book value $-3.07
  • Dividend yield 5 year Average 15%
  • Dividend rate $1.70
  • Payout ratio 293%
  • Dividend growth rate 5 year average N/A
  • Consecutive dividend increases 0 years
  • Paying dividends since 2007
  • Total return last 3 years 385%

NuStar Energy L.P. (NYSE:NS)

It has enterprise value of $5.99 billion and price/sales value of 0.60. It has strong quarterly revenue growth (yoy) of 60%, a total return of 72% for the past three years, a 5 year dividend growth rate of 4.19%, and has been paying dividends since 2001. Out of a total 5 stars we would assign NS 3.5 stars.

ROE 3.8%

  • Return on assets 9%
  • Total debt $2.57B
  • 200 day moving average $ 58.64
  • Book value $37.98
  • Dividend yield 5 year Average 7.8%
  • Dividend rate $4.34
  • Payout ratio 138%
  • Dividend growth rate 5 year average 4.19%
  • Consecutive dividend increases 9 years
  • Paying dividends since 2001
  • Total return last 3 years 70%
  • Total return last 5 years 32%

Atlas Pipeline Partners LP. (NYSE:APL)

It has enterprise value of $2. 31billion and price/sales value of 1.54. It has quarterly revenue growth (yoy) of 53%, a total return of 442% for the past 3 years, a 5 year dividend growth rate of 60% has been paying dividends since 2000. Insiders have a 16.87% stake in the company. Quarterly earnings growth (yoy) rate has dropped to negative 83%, but it has a very strong five year dividend growth rate of 60%

Atlas Pipeline Partners LP has been named as a Top 10 dividend paying energy stock, according to Dividend Channel, which published its weekly ''DividendRank'' report. The report noted that among energy companies, APL shares displayed both attractive valuation metrics and strong profitability metrics. For example, the recent APL share price of $34.71 represents a price-to-book ratio of 1.4 and an annual dividend yield of 6.23% — by comparison, the average energy stock in Dividend Channel's coverage universe yields 4.5% and trades at a price-to-book ratio of 2.5. The report also cited the strong quarterly dividend history at Atlas Pipeline Partners LP, and favorable long-term multi-year growth rates in key fundamental data points.

  • ROE 24.75%
  • Return on assets 3.12%
  • Total debt $426M
  • 200 day moving average $ 32.47
  • Book value $23.79
  • Dividend yield 5 year Average 15.10%
  • Dividend rate $1.78
  • Payout ratio 34%
  • Dividend growth rate 5 year average 60%
  • Consecutive dividend increases 0 years
  • Paying dividends since 2000
  • Total return last 3 years 442%
  • Total return last 12 months 50.9%

ONEOK Partners LP. (NYSE:OKS)

It has enterprise value of $14. 8billion and price/sales value of 1.02. It has quarterly revenue growth (yoy) of 40%, a total return of 160% for the past 3 years, a 5 year dividend growth rate of 5.24%, has been paying dividends since 1994 and has a strong quarterly earnings growth rate of (yoy) of 48%. We would assign it 3.5 stars out of a total 5 stars.

ROE 20.38%

  • Return on assets 5.96%
  • Total debt $3.95B
  • 200 day moving average $ 49.12
  • Book value $15.82
  • Dividend yield 5 year Average 6.6%
  • Dividend rate $2.33
  • Payout ratio 88%
  • Dividend growth rate 5 year average 5.24%
  • Consecutive dividend increases 5 years
  • Paying dividends since 1994
  • Total return last 3 years 160%
  • Total return last 5 years 102%
  • Total return last 12 months 38.5%

TransCanada Corp. (NYSE:TRP)

It has enterprise value of $49 billion and price/sales value of 3.36. It has quarterly revenue growth (yoy) of 12% and its total returns for the past the past 12 months have been 17.38%. We would assign it 3.5 stars out of a total 5 stars. TRP is a Canadian dividend Champion; it has consistently increased its dividend by 8 cents over the past seven years.

  • ROE 8.75%
  • Return on assets 4.15%
  • Total debt $21.65B
  • 200 day moving average $ 41.85
  • Book value $22.85
  • Dividend yield 5 year Average 3.8%
  • Dividend rate $1.68
  • Payout ratio 84%
  • Dividend growth rate 3 year average 17%
  • Consecutive dividend increases 7 years
  • Paying dividends since 1964
  • Total return last 3 years 20%
  • Total return last 12 months 17.38%

Disclaimer: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is very important that you check the finer details, do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.

Source: Pipeline Stocks With Superb Yields Part III