The energy sector is quickly becoming the place to position yourself this year as tensions escalate with Iran and nations across the globe evaluate their dependency on Middle Eastern oil. Sanctions on Iran along with an embargo on Iranian oil by the European Union and the United Kingdom will not only work to the favor of energy companies with interests outside of the Middle East, but it will drive energy prices in general through the roof due to the elimination of a great amount of the world's accessible supply of oil.
Each of the following companies has already proven its worth through high yielding dividends and consistent gains over the past three years. Income investors would be wise to consider these stocks in the wake of a major shift in the means by which the world obtains its energy that will only add fuel to the fire which drives their success.
Targa Resources Partners (NGLS) is a limited partnership that has assets located in Texas and Louisiana that complement its downstream marketing and distribution resources. It has been profitable three out of the last four years, only posting a $12 million loss in 2009 that, when compared to its average of $25 million in net revenues per quarter, seems to be a fluke. Its dividend has increased rapidly over the past four quarters and I believe that it still has plenty of room to grow.
Targa Resources Partners paid out $0.56 per share in April of 2011 and its dividend grew every single quarter since to $0.60 per share in the first quarter of 2012. Its stock has quadrupled over the past three years from $9 per share to $40 and has shown no signs to warrant a reversal anytime soon. The current projected yield on its dividend is 6% and it pays at a ratio of 0.64, and I think it is going to continue to gain in 2012 and 2013, making it a solid buy.
TC Pipelines (TCP) owns resources in the United States used by TransCanada (TRP), which is the largest natural gas pipeline company in Canada. It consistently nets over $100 million a year and its stock value has almost doubled over the past three year years from $25 per share to $46. TC Pipelines also has a consistent dividend payout of $0.77 per share, which grew from $0.75 in the second quarter of 2011. It pays out at a ratio of 0.26 and currently has a projected yield near 7%, which I think makes it another perfectly positioned stock for now and the future.
MarkWest Energy Partners (MWE) is a natural gas and crude oil processing and transport company with assets dispersed across the United States in the southwest, northeast and Gulf Coast. It has produced a profit in three of its last four years and its share price has risen from $9 per share to $58 in three years, making it a rapidly growing and explosive stock to have a position in. MarkWest Energy Partners pays a dividend of $0.76 per share, which is up from $0.67 four quarters ago.
Like Targa Resources Partners, MarkWest Energy Partners is a fast growing and high yielding dividend stock. It produces a yield of 5% and is paying out at a ratio of 0.43, and at the rate its price is climbing, I think it is best to take a position here sooner rather than later.
Crestwood Midstream Partners (CMLP) produces most of its revenue from its midstream operations for Quicksilver Resources (KWK), which utilizes Crestwood Midstream Partners primarily in its Barnett Shale operation. The company consistently produces profits near or above $30 million per year and its share price rose over the last three years from $14 per share to $28. Its dividends currently pay out at $0.49 per share - which is up 5 cents from a year ago. I suspect that Crestwood Midstream Partners will continue to provide yields around 6%-7%, making it another buy worthy of consideration in 2012.
Enbridge Energy Partners (EEP) maintains and operates the largest crude oil pipeline in the world, spanning 3,300 miles from Chicago in the United States into Alberta in Canada. It consistently produces $100 million or more in net revenue each quarter and its share price has risen from $12 per share to $32 over three years, making it a fast growth stock with a dividend of $0.53 per share to provide a yield over 6%. Its growth potential and high yielding dividend are why I believe this is another stock to add to your portfolio.
What I like best about all of these companies is that they all operate free of interests in the Middle East and are positioned perfectly to capitalize on skyrocketing oil and natural gas prices, should conditions escalate between Iran and the West. Each company is profitable and each as a steady three year history of growth with returns that will attract income investors who want to reinvest dividends for a stronger position at no additional cost.