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Due to the extremely volatile nature of the markets and economic uncertainty, more and more investors are gravitating towards stocks and MLPs that pay dividends/distributions. Normally, individuals need to focus on payout ratios, but in the case of MLPs the payout ratio is not really that important because MLPs are required by law to pay a majority of their cash flow as distributions. Payout ratios are calculated by dividing the distribution rate by the net income per share, and this is why the payout ratio for MLPs is often higher than 100%. The more important ratio to focus on is the cash flow per unit. If one focuses on the cash flow per unit, one will see that in most cases, it exceeds the distribution declared per unit.

Our favorite play is Plains All American Pipeline (PAA); it has a quarterly revenue growth rate of 37.8%, a quarterly earnings growth rate of 246.90%, a ROE of 17.34%, a total three-year return of 159%, and it has consecutively increased its distributions for 11 years in a row. Finally, it has a very strong levered free cash flow rate of $849 million. Out of a possible five stars, we would assign PAA with four.

Investors looking for small cap stock with superb yields might find our latest article to be of interest, where four stocks with yields as high as 10% are examined. Three other noteworthy plays are Enterprise Products Partners (NYSE:EPD), Breitburn Energy Partners L.P. (NASDAQ:BBEP) and Enbridge Energy Partners LP (NYSE:EEP).

Enterprise Products has an enterprise value of $54.96 billion, a yield of 5.4%, 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/ distributions 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.

Breitburn Energy Partners has enterprise value of $1.63 billion, a yield of 9.2% and price/sales value of 1.70. It has a positive levered free cash flow rate of $4.76 million and quarterly revenue growth of 26.90%. Net income for the past three years is as follows; in 2008, it came in at $378 million, in 2009 it dropped down to $107 million and in 2010 it moved up to $34.7 million. For 2011, it is roughly $140 million.

Enbridge Energy Partners has an enterprise value of $14.02 billion, a yield of 6.6%, a quarterly revenue growth of 25%, a ROE of 10.23%, a five-year dividend growth rate of 2.5%, a total return of 211% for the past three years, and has been paying dividends/ distributions since 1992. It has a levered free cash flow rate of -$1.01 billion. It has also consecutively increased its dividends for four years. EEP also sports the following per-share data:

  • Earnings 1.81
  • Sales 40.31
  • Book Value 16.80
  • Cash Flow 3.1

EEP is moving in the right direction by expanding its capacity to handle an additional 80,000 barrels of oil. The project is expected to be ready by 2013. It already has commitments for 70% of the rail loading capacity and expects to complete agreements for the remaining capacity soon.

Stock

Dividend

Market Cap

Forward PE

EBITDA

Quarterly revenue growth

Beta

Revenue

Operating

Cash flow

APL

6.00%

1.96B

21

166.1M

53%

1.09

1.23B

85.8M

PAA

5.5%

10.9B

17

1.40B

37.8%

0.36

36.2B

1.55B

NS

7.7%

3.6B

17

500.0M

60.3%

0.47

5.84M

283M

DMLP

7.8%

697M

19

55.21M

11.3%

0.34

63.8M

52.3M

M= millions, B= Billions.

Atlas Pipeline Partners LP

It has an enterprise value of $2.36 billion, a quarterly revenue growth rate of 53%, a quarterly earnings growth rate of -83%, a ROE of 24.75%, a strong five-year distribution growth rate of 60.15%, a strong 5 year dividend/ distributions average of 18.5%, a total three-year return of 642% and has been paying dividend/distributions since 200. It has a levered free cash flow rate of- $60.55.

Net income for the past three years is as follows: in 2008, it came in at -$581 million; in 2009 it turned positive and surged to $62 million; in 2010, it soared to $280 million. Net income for 2011 is roughly $300 million. The distribution was increased by 7 cents from 47 cents to 54 cents.

  • Price to tangible book 1.62
  • Price to sales 1.56
  • Price to cash flow 5.20
  • Price to free cash flow -11.40
  • 5 year sales growth 17.29
  • Inventory turnover N/A
  • Asset turnover 0.70

  • ROE 24.75%
  • Return on assets 3.12%
  • 200 day moving average $32.52
  • Total debt $425M
  • Book value $23.79
  • Dividend yield 5 year Average 18.50%
  • Dividend rate $1.78
  • Payout ratio 34%
  • Dividend growth rate 5 year average 60.15%
  • Consecutive dividend increases 0 years
  • Paying dividends since 2000
  • Total return last 3 years 642%
  • Total return last 5 years -5.14%

Plains All American Pipeline

It has an enterprise value of $15.95 billion, a quarterly revenue growth rate of 37.8%, a quarterly earnings growth rate of 246.90%, a ROE of 17.34%, a five-year dividend growth rate of 6.43%, a total three-year return of 159%, and has been paying dividends/distributions since 1999. It has a levered free cash flow rate of $849 million, and it has consecutively increased its distributions for 11 years in a row. Out of a possible five stars, we would assign PAA four.

Net income for the past three years is as follows: in 2008, it came in at $437 million; in 2009 it moved up to $579 million; in 2010, it dropped a bit to $505 million. Net income for 2011 so far stands at $688 million; if the next quarter matches the last quarter, then total net income for the year could soar well past the $970 million mark.

  • Price to tangible book 2.18
  • Price to sales 0.33
  • Price to cash flow 3.28
  • Price to free cash flow 10.00
  • 5 year sales growth 4.28%
  • Inventory turnover 23.40
  • Asset turnover 2.40

  • ROE 17.34%
  • Return on assets 5.4%
  • 200 day moving average $63.13
  • Total debt $5.16B
  • Book value $32.33
  • Dividend yield 5 year Average 7.10%
  • Dividend rate $3.91
  • Payout ratio 93%
  • Dividend growth rate 5 year average 6.43%
  • Consecutive dividend increases 11 years
  • Paying dividends since 1999
  • Total return last 3 years 159%
  • Total return last 5 years 76%

NuStar Energy L.P.

It has an enterprise value of $6.18 billion, a quarterly revenue growth rate of 60%, a quarterly earnings growth rate of 2.7%, a ROE of 9.32%, a five-year distributions growth rate of 4.19%, a total three-year return of 77%, and has been paying dividends/distributions since 2001. It has a levered free cash flow rate of $49.9 million.

Net income for the past three years is as follows: in 2008, it came in at $254 million; in 2009 it dropped down to $224 million; in 2010, it moved up to $238 million. Net income for 2011 is roughly $191 million. Out of a possible 5 stars, we would assign NS 3.8 stars.

  • Price to tangible book 2.26
  • Price to sales 0.63
  • Price to cash flow 9.30
  • Price to free cash flow -8.30
  • 5 year sales growth 37.8%
  • Inventory turnover 6.10
  • Asset turnover 1.10

  • ROE 9.32%
  • Return on assets 3.8%
  • 200 day moving average $57.99
  • Total debt $2.97B
  • Book value $37.98
  • Dividend yield 5 year Average 7.70%
  • 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 77%
  • Total return last 5 years 38%

Dorchester Minerals LP

It has an enterprise value of $690 million, a quarterly revenue growth rate of 11.3%, a quarterly earnings growth rate of 20.7%,a ROE of 24%, a five-year dividend growth rate of -4.9%, a total three-year return of 74%, and has been paying dividends/distributions since 2003. It has a levered free cash flow rate of $38.2 million.

Net income for the past three years is erratic: in 2008, it came in at $66 million; in 2009 it dropped to $21 million; in 2010 it moved up to $34.8 million. For 2011, net income stands at $25 million. If net income for the next quarter matches that of the last quarter, total net income for 2011 could come in at roughly $36.5 million or higher.

Potential Negatives

The 5-year dividend growth rate average has turned negative; typically, one wants to see this number remain positive and increase over the years. As net income appears to be on the rise again, the 3 and 5 year averages dividend growth rate averages could turn positive in the future. On the bright side DMLP has zero long-term debt.

  • Price to tangible book 4.92
  • Price to sales 11.05
  • Price to cash flow 12.70
  • Price to free cash flow ---
  • 5 year sales growth -5.53
  • Inventory turnover N/A
  • Asset turnover 0.40

  • ROE 24.81%
  • Return on assets 15.3%
  • 200 day moving average $24.62
  • Total debt $0.00
  • Book value $4.53
  • Dividend yield 5 year Average 9.60%
  • Dividend rate $1.67
  • Payout ratio 147%
  • Dividend growth rate 5 year average -4.90%
  • Consecutive dividend increases 1 years
  • Paying dividends since 2003
  • Total return last 3 years 74%
  • Total return last 5 years 48%

Conclusion

The charts are still indicating that the markets will most likely trend higher into the new year, though the ride up is expected to very volatile; our current targets for the SPX fall in the 1300-1320 ranges. Going a bit further out the charts are projecting a strong correction for the markets early next year. Thus, the better trade might be to wait for the strong pull back before deploying large amounts of capital into the market.

All charts were sourced from dailyfinance.com

Source: 4 MLPs Offering Excellent Yields

Additional disclosure: 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.