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By Roger Choudhury

I ran a stock screen on the energy sector. Preferred stocks tend to be speculative in this arena, and thus have higher yielding securities. With the Fed targeting 0%-0.25% for the federal funds rate, hoarding cash is a lose-lose situation. To beat inflation and seek alpha, you ought to consider the following:

Magnum Hunter Resources (NYSE:MHR) (10.25% Cumulative Series C)

Recent Price

$25.20 per share

Callable?

Yes, at $25.00 per share, since Dec 2011

Preferred Stock IPO

Dec 2009

Dividends

$0.2135417 per month

All payments made since inception

Next dividend payment should be on Mar 30

Record date is on Mar 15

Current yield

10.0%

S&P Rating

None

52 week trading range

$17.79 - 27.49

Ticker symbol (Yahoo! / Google / Fidelity)

MHR-PC / MHR-C / MHR/PC

In the first nine months of 2011, losses before taxes widened to $20.028 million from $14.609 million in the same period in 2010. The interest expense also grew to $6.988 million from $2.675 million for the same periods, respectively. However, revenues shot up by 248.6% to $80.1 million in the most recent time frame. This adds a degree of safety, but this is still a purely speculative play. I recommend this only to aggressive investors looking for a high yielding energy instrument.

Double Eagle Petroleum (NASDAQ:DBLE) (9.25% Cumulative Series A)

Recent Price

$26.30 per share

Callable?

Yes, at $25.00 per share, after Jun 29, 2012

Preferred Stock IPO

Jun 2007

Dividends

$0.578125 per quarter

All payments made since inception

Next dividend payment should be on Mar 30

Record date is in the third week of Mar

Current yield

8.7%

S&P Rating

None

52 week trading range

$22.00 - 26.89

Ticker symbol (Yahoo! / Google / Fidelity)

DBLEP

EBIT declined by 25.8% in the first nine months of 2011 to $9.356 million, but interest expense fell by 14.9% to $997 million. The company adequately manages to cover the preferred dividends with cash, which is a good sign for the company's momentum. With the increasing use of natural gas in the U.S. and WTI crude hovering around $100 per barrel, the preferred dividends should be disbursed for the next couple of years. Again, these shares are for those seeking high yields in the energy sector. Retirees and those nearing retirement should avoid this. Please do not be greedy.

Gastar Exploration (NYSEMKT:GST) (8.625% Cumulative Series A)

Recent Price

$19.90 per share

Callable?

Yes, at $25.00 per share, after Jun 22, 2014

Preferred Stock IPO

Jun 2011

Dividends

$0.1796875 per month

All payments made since inception

Next dividend payment should be on Mar 30

Record date is on Mar 15

Current yield

10.6%

S&P Rating

None

52 week trading range

$17.25 - 23.23

Ticker symbol (Yahoo! / Google / Fidelity)

GST-PA / GST-A / GST/PA

In the first nine months of 2011, losses before income tax fell to $376,000 from $10.320 million in the same period in 2010. Interest expense also fell to $87,000 from $120,000 in the respective time frames. Given the upward trajectory in revenues, I am more comfortable that the preferred dividends payments shall be made. Yet, this is highly speculative, so assess your risk profile by understanding how much in losses that you can take.

El Paso Energy (EP) (Trust Convertible)

Recent Price

$19.90 per share

Callable?

Yes, at $25.00 per share, after Jun 22, 2014

Preferred Stock IPO

Jun 2011

Dividends

$0.1796875 per month

All payments made since inception

Next dividend payment should be on Mar 30

Record date is on Mar 15

Current yield

10.6%

S&P Rating

B

52 week trading range

$17.25 - 23.23

Ticker symbol (Yahoo! / Google / Fidelity)

EP-PC / EP-C / EP/PC

In the first nine months of 2011, EBIT fell severely to $109 million from $1,131 million in the same period in 2010. Fortunately, interest expense fell by $61 million, and revenues remained static at $3,628 million. The company continues to move aggressively to meet customer demand. The latest expansion is another Marcellus-related expansion on TGP, bringing the total Marcellus expansions to $1.3 billion. Also, EP-PC is the highest rated security on this list, but this is still categorized as speculative, and only for aggressive income investors. Retirees should not purchase this.

On October 16, 2011, Kinder Morgan (NYSE:KMI) announced that it will acquire all of the outstanding shares of EP.

Source: 4 Preferred Energy Stocks For Yield Seekers