7 MLPs With Magnificent Yields

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Includes: BPL, BWP, CMLP, DPM, EPD, KMP, MWE
by: Tactical Investor

The seven MLPs that will be examined today fall under the pipeline sector. The benefit of investing in pipeline operators is that once the business is up and running, it generates stable cash flows from long-term contracts. The increased volatility in the markets and uncertainty as to what the future holds has made investing in stocks that pay dividends in vogue again. The quest for higher yields is further exacerbated due to the low yields (which are negative when inflation is factored) that Treasuries are paying, which in turn forces fixed income seekers to take on more risk. This list contains some of the most stable companies in this sector. Investors with low risk tolerance levels will be best served if they invest in companies that have a rating of four stars or higher.

The following metrics have also been provided. Enterprise value, levered free cash flow rates and operating cash flows.

Enterprise 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 contrary to simply looking at the market cap.

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. Individuals searching for stocks that offer significantly higher yields but with a slight increase in risk might be interested in this article.

Operating cash flow 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.

Stock

Dividend

Market Cap

Forward PE

EBITDA

Beta

Quarterly revenue growth

Revenue

Operating

Cash flow

KMP

5.7

27.8B

36

2.64B

0.36

6.6%

8.13B

2.87B

EPD

5.4

39B

19

3.68B

0.59

40.40%

42.3B

3.08B

CMLP

6.10

1.17B

33

102.9M

0.96

93%

177M

71M

BWP

7.6

5.52B

19

650M

0.20

4.40%

1.14B

455M

MWE

5.4

4.76B

23

544.4M

0.94

24%

1.47B

446M

BPL

6.4

5.97B

18.3

427.5M

0.28

----

4.46B

178.4M

DPM

5.7

1.99B

23

195.9M

1.09

29%

1.53B

152M

Click to enlarge

Kinder Morgan Energy Partners (KMP)

Kinder Morgan has an enterprise value of $41.23 billion, a quarterly revenue growth of 6.6%, a ROE of 15.97%, a five-year dividend growth rate of 7.31%, a total return of 117% for the past three years, and has been paying dividends since 1992. It has a levered free cash flow rate of $265 million. Out of a possible five stars, we would assign Kinder Morgan four.

Key ratios

  1. Price to tangible book 3.66
  2. Price to cash flow 19.10

  3. Price to free cash flow -5.70

  4. 5 year sales growth -3.95%

  5. Inventory turnover 134.5

  6. Asset turnover 0.4

  1. ROE 15.97%

  2. Return on assets 4.67%

  3. Total debt $13.6B

  4. 200 day moving average $ 72.82

  5. Book value $22.16

  6. Dividend yield 5 year average 6.7%

  7. Dividend rate $4.58

  8. Dividend growth rate 5 year average 7.31%

  9. Consecutive dividend increases 14 years

  10. Paying dividends since 1992

  11. Total return last 3 years 112%

  12. Total return last 5 years 117%

Enterprise Products Partners LP (EPD)

Enterprise Products has an enterprise value of $54 billion, a quarterly revenue growth of 40.40%, a ROE of 14.55%, a five-year dividend growth rate of 6.03%, a total return of 158% for the past three years, and has been paying dividends since 1998. It has a levered free cash flow rate of -$1.01 billion. Out of a possible five stars we would assign Enterprise Products four.

Key ratios

  1. Price to tangible book 5.12

  2. Price to cash flow 25.20

  3. Price to free cash flow - 31.00

  4. 5 year sales growth 23.27%

  5. Inventory turnover 134.5

  6. Asset turnover 0.4

  1. ROE 14.55%

  2. Return on assets 5.23%

  3. Total debt 15.4B

  4. 200 day moving average $42.27

  5. Book value $13.40

  6. Dividend yield 5 year average 6.03%

  7. Dividend rate $2.40

  8. Payout ratio 190%

  9. Dividend growth rate 5 year average 6.03%

  10. Consecutive dividend increases 12 years

  11. Paying dividends since 1998

  12. Total return last 3 years 158%

  13. Total return last 5 years 95%

Crestwood Midstream Partners LP (CMLP)

Crestwood has an enterprise value of $1.69 billion, a quarterly revenue growth of 93%, a ROE of 11.63%, a three-year dividend growth rate of 11.27%, a total return of 321% for the past three years, and has been paying dividends since 2007. It has a levered free cash flow rate of $6.05 million. Out of a possible five stars we would assign Crestwood three.

Key ratios

  1. Price to tangible book 4.93

  2. Price to cash flow 18.50

  3. Price to free cash flow -3.70

  4. 5 year sales growth N/A

  5. Inventory turnover N/A

  6. Asset turnover 0.2

  1. ROE 11.63%

  2. Return on assets 6.2%

  3. Total debt $435M

  4. 200 day moving average $27.13

  5. Book value $11.42

  6. Dividend yield 5 year average N/A

  7. Dividend rate $1.81

  8. Payout ratio 181%

  9. Dividend growth rate 3 year average 11.27%

  10. Consecutive dividend increases 3 years

  11. Paying dividends since 2007

  12. Total return last 3 years 321%

  13. Total return last 5 years N/A

Boardwalk Pipeline Partners, LP (BWP)

Boardwalk has an enterprise value of $8.6 billion, a quarterly revenue growth of 4.40%, a ROE of 7.2%, a five-year dividend growth rate of 10.18%, a total return of 86% for the past three years, and has been paying dividends since 2006. It has a levered free cash flow rate of $177 million.

Key ratios

  1. Price to tangible book 1.78
  2. Price to cash flow 11.70

  3. Price to free cash flow 14.60%

  4. 5 year sales growth 23.27%

  5. Inventory turnover 39.40

  6. Asset turnover 0.20

  1. ROE 7.2%

  2. Return on assets 3%

  3. Total debt 3.2B

  4. 200 day moving average $26.96

  5. Book value $16.04

  6. Dividend yield 5 year average 7.3%

  7. Dividend rate $2.19

  8. Payout ratio 171%

  9. Dividend growth rate 5 year average 10.18%

  10. Consecutive dividend increases 4 years

  11. Paying dividends since 2006

  12. Total return last 3 years 86.7%

  13. Total return last 5 years 19%

MarkWest Energy Partners LP. (MWE)

MarkWest has an enterprise value of $5.93 billion, a quarterly revenue growth of 37%, a ROE of 7.09%, a five-year dividend growth rate of 8.24%, a total return of 742% for the past three years, and has been paying dividends since 2002. It has a levered free cash flow rate of -$38 million.

Key ratios

  1. Price to tangible book 6.59

  2. Price to cash flow 16.80

  3. Price to free cash flow -9.50

  4. 5 year sales growth 17.23%

  5. Inventory turnover 18.50

  6. Asset turnover 0.40

.

  1. ROE 7.09%

  2. Return on assets 6.12%

  3. Total debt $1.48B

  4. 200 day moving average $ 48.45

  5. Book value $17.42

  6. Dividend yield 5 year average 11%

  7. Dividend rate $2.75

  8. Payout ratio 299%

  9. Dividend growth rate 5 year average 8.24%

  10. Consecutive dividend increases 0 years

  11. Paying dividends since 2002

  12. Total return last 3 years 742%

  13. Total return last 5 years 128%

DCP Midstream Partners LP. (DPM)

DCP Midstream has an enterprise value of $2.78 billion, a quarterly revenue growth of 29.2%, a ROE of 14%, a decent five-year dividend growth rate of 17.3%, a very strong total return of 424% for the past three years, and has been paying dividends since 2006. It raised its dividend from $0.6325 to $0.64. It has a levered free cash flow rate of $84.25 million.

Key ratios

  1. Price to tangible book 5.23
  2. Price to cash flow 10.40

  3. Price to free cash flow -6.10

  4. 5 year sales growth 11.62%

  5. Inventory turnover 29.10

  6. Asset turnover 0.90

  1. ROE 14.35%

  2. Return on assets 4.39%

  3. Total debt $748 million

  4. 200 day moving average $ 40.79

  5. Book value $14.63

  6. Dividend yield 5 year average 9.70

  7. Dividend rate $2.52

  8. Payout ratio 144%

  9. Dividend growth rate 5 year average 17.3%

  10. Consecutive dividend increases 4 years

  11. Paying dividends since 2006

  12. Total return last 3 years 424%

  13. Total return last 5 years 67%

Buckeye Partners LP (BPL)

Buckeye has an enterprise value of $8.7 billion, a quarterly revenue growth of 52%, a ROE of 5.06%, a five-year dividend growth rate of 5.88, a total return of 163% for the past three years, and has been paying dividends since 1990. It has a levered free cash flow rate of -$63 Million. Out of a possible five stars we would assign Buckeye four.

Key ratios

  1. Price to tangible book 4.47

  2. Price to cash flow 87.00

  3. Price to free cash flow -4.00

  4. 5 year sales growth 58.55%

  5. Inventory turnover 12.1

  6. Asset turnover 1.00

  1. ROE 5.06%

  2. Return on assets 4.74%

  3. Total debt $2.75b

  4. 200 day moving average $ 63.44

  5. Book value $25.20

  6. Dividend yield 5 year average 7.40%

  7. Dividend rate $4.03

  8. Payout ratio 208%

  9. Dividend growth rate 5 year average 5.88%

  10. Consecutive dividend increases 15 years

  11. Paying dividends since 1990

  12. Total return last 3 years 160%

  13. Total return last 5 years 77%

Conclusion

The overall champ on this list is Buckeye. It has increased dividends for 15 years, has been paying dividends since 1990, has a five year dividend growth rate of 5.88%, a five year dividend average rate of 7.4% and a total return for the last three years of 160%. We also like Kinder Morgan and Enterprise Products for their long dividend payment histories and for consecutively increasing their dividends for over 10 years in a row. Kinder Morgan, Enterprise Products and Buckeye all carry a four star rating. DCP Midstream, Boardwalk Pipeline, Enterprise Products and Kinder Morgan are among Credit Suisse's top MLP picks.

Suggested strategy: The technical pattern for the Dow and the SPX are both indicating that some sort of pullback is in the works. This pullback should take place during the 27-29th of this month. At that point, a low is expected and the markets should rally from there on to year end and to the first part of next year. Hence, traders can use the next pullback as the basis for opening up positions in the above plays if they meet with your risk tolerance levels. Currently, the SPX is projecting a test of the 1300-1330 ranges (there is a possibility it could spike on an intra day basis to 1340) and there is a decent chance that the Dow could test and even surpass the 12,800 ranges.

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

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 in each of the mentioned plays before investing any capital in them. The Latin maxim caveat emptor applies-let the buyer beware.

All earnings vs . Expectations graphs sourced from smartmoney.com