4 Good Plays And 3 Not So Good Plays With Yields As High As 9.4%

|
Includes: BMO, CCLP, CIG, ETP, NS, RNO, VOC
by: Tactical Investor

Three of the plays on this list are speculative in nature and only investors willing to take on extra risk should consider opening a position in them. The said plays are VOC Energy Trust Units of Benef (NYSE:VOC), Compressco Partners, L.P. (GSJK) and Rhino Resource Partners LP Comm (RNO. Important key metrics relevant to dividend investing are discussed in this article 7 Candidates With Yields As High As 11.5%; understanding these metrics could prove to be very useful in the selection process.

Our favourite play on the list is Nustar Energy L.P. Common Unit (NYSE:NS) with Bank of Montreal Common Stock (NYSE:BMO) coming in at a close second, with yields of 7.4% and 4.60%, respectively.

NS has an enterprise value of $6.29 billion, a quarterly revenue growth rate of 60.3%, a quarterly earnings growth rate of 2.7%, a ROE of 9.32%, a five-year distribution growth rate of 4.19%, a total three-year return of 62%, and has been paying dividends/distributions since 2001. It has a levered free cash flow rate of- $49.9 million and a current ratio of 1.22. After dipping briefly in 2009, net income is on the rise again. It has consecutively increased its dividends for 10 years in a row. Out of a possible five stars we would assign NS four stars.

Net income for the past three years

  1. 2008 = $254 million
  2. 2009 = $224 million
  3. 2010 = $238.9 million
  4. 2011= it stands at $191.5 million and could top the $262 million mark.

Total cash flow from operating activities

  1. 2008 = $485 million
  2. 2009 = $180.5million
  3. 2010 = $ 362 million
  4. 2011= it stands at $100 million and could top the $200 million mark.

Positive developments

It's said that happy employees usually make for productive employees and the fact that NS is rated as number 15 on the list of the best companies to work for should be viewed as a positive development. NuStar Moves up to No. 15 on the List of the 100 Best Companies to Work For.On FORTUNE's website, NuStar is highlighted for paying 100% of employees' health care premiums, having a no-layoff policy, and matching 401(k) contributions up to 6 percent of pay. There is also a write-up about NuStar in the site's Best Perks section, as the company was listed among 14 companies with the best health care benefits.

Bank Montreal has a quarterly revenue growth rate of 20.7%, a ROE of 12.67%, a five-year dividend average of 6.3%, a payout ratio of only 53%, a five-year dividend growth rate of 4.65%, a total return for the last three years of 183%, and it has been paying dividends since 1829. Net income has been increasing for the past three years and it sports a beta of 1.31, which makes it a good candidate for covered writes (selling covered calls).

Net income for the past three years

  1. 2009 = $1.66 billion
  2. 2010 = $2.76 billion
  3. 2011 = $3.29 billion

Total cash flow from operating activities

  1. 2009 = $11.88 billion
  2. 2010 = $-6.47 billion
  3. 2011 = $.58 billion

Key Ratios

  1. P/E Ratio11.2
  2. P/E High - Last 5 Yrs21.6
  3. P/E Low - Last 5 Yrs6.8
  4. Price to Sales2.14
  5. Price to Book1.49
  6. Price to Tangible Book1.87
  7. Price to Cash Flow12.1
  8. Price to Free Cash Flow-35.8

Important facts investors should be aware in regards to investing in MLPs

  1. Payout ratios are not that important when it comes to MLPS as they are required by law to pay a majority of their cash flow as distributions. Payout ratios are calculated by dividing the dividend/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.
  2. MLPs are not taxed like regular corporations because they pay out a large portion of their income to partners (as an investor you are basically a partner and are allocated units instead of shares) usually through quarterly distributions. The burden is thus shifted to the partners who are taxed at their ordinary income rates. As ordinary income tax rates of investors are typically lower than the income tax assessed on corporations, this arrangement is advantageous to the MLPs and generally most investors.
  3. MLPs issue a Schedule K-1 to their investors. If the MLP pays out distributions in excess of the income it generates, the distribution is classified as a "return of capital" and tax deferred until you sell your shares or units. Income from MLPs is generally taxable even in retirement accounts like 401KS and IRAs if the income generated is in excess of $1000. For more information, on this topic investors can visit the National Association of Publicly Traded Partnerships.

Stock

Dividend Yield

Market Cap

Forward PE

EBITDA

Quarterly Revenue Growth

Beta

Revenue

Operating Cash flow

VOC**

6.40%

381.65M

8.28

N/A

N/A

N/A

22.26M

N/A

GSJK**

2.70%

250.89M

14.68

27.24M

22.50%

N/A

89.75M

4.76M

RNO**

9.4%

573.93M

10.01

67.38M

9.80%

N/A

338.08M

63.45M

CIG

8.50%

13.41B

12.44

2.91B

10.70%

0.66

8.04B

2.06B

ETP

7.40

10.35B

20.0

1.62B

32.9%

0.63

6.49B

1.13B

Click to enlarge

**= Speculative plays

VOC Energy Trust

Industry : Holding and other Investment Offices

Net income for the past three years

2008 =-$2 million

2009 =$24 million

2010 = -$7 million

Total cash flow from operating activities

2008 =$8 million

2009 =$32 million

2010 =$9 million

Key Ratios

P/E Ratio = N.A.

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 9.81

Price to Book = 2.78

Price to Tangible Book = 2.78

Price to Cash Flow = 13.7

Price to Free Cash Flow = 13.7

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 0

Total Debt to Equity = 0

Interest Coverage = N.A.

Inventory Turnover = N.A.

Asset Turnover = 0

ROE = N/A

Return on Assets = N/A

200 day moving average = 21.78

Current Ratio = N/A

Total debt = 0

Book value = 8.02

Qtrly Earnings Growth = N/A

Dividend yield 5 year average = 0%

Dividend rate = $ 2.48

Payout ratio = 0%

Dividend growth rate 3 year avg = 0%

Dividend growth rate 5 year avg = 0%

Consecutive dividend increases = 0 years

Paying dividends since = 2011

Total return last 3 years = N/A

Total return last 3 years = N/A

Potential warning

Units of VOC Energy Trust tumbled Friday, after the Texas-based oil and gas trust announced a lower-than-expected fourth-quarter distribution. At least two analysts downgraded the company's investment rating. Net income took a bit hit in 2010.

Compressco Partners L.P.

Industry : Equipment & Services

GSJK provides wellhead compression-based production enhancement services to natural gas and oil exploration and production companies in the United States, Canada, and Mexico. It was incorporated in 2008 and was formerly a subsidiary of Compressco Field Services, Inc.

Net income

2009 =$6.5 million

2010 =$13.9 million

Operating income

2009 =$22.5 million

2010 =$15 million

Key Ratios

P/E Ratio = 63.2

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 2.75

Price to Book = 1.29

Price to Tangible Book = 2.07

Price to Cash Flow = 7.7

Price to Free Cash Flow = -32.9

Quick Ratio = 2.3

Current Ratio = 3.5

LT Debt to Equity = 0

Total Debt to Equity = 0

Interest Coverage = N.A.

Inventory Turnover = 2.8

Asset Turnover = 0.4

ROE = 4.31%

Return on Assets = 4.31%

200 day moving average = 3.26K

Current Ratio = 3.48

Total debt = 0

Book value = 12.18

Qtrly Earnings Growth = 4065.8%

Dividend yield 5 year average = 0%

Dividend rate = $ 1.55

Payout ratio = 0%

Paying dividends since = 2011

Total return last 3 years = N/A

Total return last 3 years = N/A

Potential warning

This is a new MLP and has a limited dividend or earnings history, so only individuals willing to take on a bit of extra risk should consider this play. The last 3 dividend payments have been posted below.

Rhino Resource Partners LP

Industry : Mining

Rhino Resource Partners LP produces, processes, and sells coal of various steam and metallurgical grades in the United States. It has a levered free cash flow rate of -$10.29 million and a current ratio of 1.20

Net income for the past three years

2008 =$1 million

2009 =$19 million

2010 =$41.49 million

Operating income

2008 =$8 million

2009 =$25 million

2010 =$42 million

Key Ratios

P/E Ratio = 6.8

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 1.65

Price to Book = 1.84

Price to Tangible Book = 1.84

Price to Cash Flow = 7

Price to Free Cash Flow = -4.4

Quick Ratio = 0.8

Current Ratio = 1.2

LT Debt to Equity = 0.38

Total Debt to Equity = 0.38

Interest Coverage = 8.8

Inventory Turnover = 16.3

Asset Turnover = 0.8

ROE = 13.22%

Return on Assets = 13.22%

200 day moving average = 20.59

Current Ratio = 1.2

Total debt = 117.26M

Book value = 10.63

Qtrly Earnings Growth = -54.9%

Dividend yield 5 year average = 0%

Dividend rate = $ 1.92

Payout ratio = 0%

Dividend growth rate 3 year avg = 0%

Dividend growth rate 5 year avg = 0%

Consecutive dividend increases = 0 years

Paying dividends since = 2011

Total return last 3 years = N/A

Total return last 3 years = N/A

Potential warning

Quarterly earnings growth rate is negative (-54.9%). On the other hand, net income has been increasing for the past 3 years.

Companhia Energetica de Minas

Industry: Electric Utilities

Net income for the past three years

2008 = 752 million

2009 = 1.26 billion

2010 = 1.36 billion

Total cash flow from operating activities

2008 = 1.27 billion

2009 = 1.47 billion

2010 = 2.08 billion

Key Ratios

  1. P/E Ratio7.1
  2. P/E High - Last 5 Yrs26.9
  3. P/E Low - Last 5 Yrs4.9
  4. Price to Sales2.19
  5. Price to Book1.9
  6. Price to Tangible Book3.37
  7. Price to Cash Flow7.8
  8. Price to Free Cash Flow-668
  9. Quick Ratio0.9
  10. Current Ratio1.2
  11. LT Debt to Equity 0.78
  12. Total Debt to Equity1.07
  13. Interest Coverage N.A.
  14. Inventory TurnoverN.A.
  15. Asset Turnover0

  1. ROE 19.26%
  2. Return on Assets7.67%
  3. 200 day moving average17.48
  4. Current Ratio1.19
  5. Total debt7.98B
  6. Book value10.92
  7. Qtrly Earnings Growth-0.40%
  8. Dividend yield 5 year average5.50%
  9. Dividend rate$ 1.08
  10. Payout ratio 58%
  11. Dividend growth rate 3 year average46.08%
  12. Dividend growth rate 5 year average17.49%
  13. Consecutive dividend increases0 years
  14. Total return last 3 years143.83%
  15. Total return last 5 years 128.22%

Energy Transfer Partners LP

It has a levered free cash flow rate of -$309 million and a current ratio of 0.84.

Net income for the past three years

  1. 2008= $886 million
  2. 2009= $791 million
  3. 2010= $617 million
  4. 2011= it stands at $462 million and could top the $520 million mark.

Total cash flow from operating activities

  1. 2008= $1.28 billion
  2. 2009 =$826.8 million
  3. 2010 = -$1.202 million
  4. 2011= It stands at $730 million and could top the $1.2 billion mark.

Key ratios

  1. Price to tangible book 2.78
  2. Price to cash flow 7.20
  3. Price to free cash flow -5.00
  4. 5 year sales growth -5.57%
  5. Inventory turnover 17.50
  6. Asset turnover 0.50

  1. ROE 13.46%
  2. Return on assets 5.66%
  3. 200 day moving average $ 44.80
  4. Total debt $ 8.08B
  5. Book value $23.75
  6. Dividend yield 5 year Average 7.80%
  7. Dividend rate $ 3.58
  8. Payout ratio 260%
  9. Dividend growth rate 5 year average 7.56%
  10. Consecutive dividend increases 0 years
  11. Paying dividends since 1996
  12. Total return last 3 years 77.6%
  13. Total return last 5 years 25%

New Developments

Energy Transfer Partners LP board of directors announced a quarterly distribution of $0.894 per unit for the quarter ended Dec 31, 2011. The cash distribution will be paid on Feb 7, 2012

Conclusion

The markets are overbought and the SPX just hit our suggested targets which we issued about a month ago and so we feel that the markets are ripe for a strong fast pull back. Long term investors should wait for a pullback before committing new sums of money to the market.

On Dec. 16, we made the following comments:

On a short-term basis, the Dow has put in a bottom and is getting ready to challenge the 12,000 ranges again. However, there is a chance that the recent lows could be tested before the rally gathers steam. Going out a little further, the cycles suggest that the Dow should be able to rally until early next year and there is a fairly good chance that the Dow could trade to the 12,800 range and the and the SPX could trade to the 1305-1330 plus range with the possibility of mounting an intra-day spike to the 1340 range. The dollar is overbought and has generated a few sell signals on the hourly time frames, so a pullback here would help drive commodities and the general market higher.

In a recent article written on Dec. 26 and published on Dec. 27, we made the following comments:

Going forward, we think that the markets could put in a short term top around the 27-29th (Dec) of this month. The pullback should provide traders with a good opportunity to open up long positions.

On the Jan. 3, we made the following statement:

While we still feel that the SPX could trade to the 1300-1320 ranges, our advice to long term traders would be to sit on the sidelines waiting for opportune moments to present themselves before deploying large sums of money into this market. Fixed income investors can hedge themselves to some degree by selling covered calls. A more aggressive option would be to purchase long term puts to hedge your portfolio against a potentially strong sell-off.

All charts sourced from dividata.com

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