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The market is currently wrapping up its best first quarter in 14 years. My opinion is that equities have run past where current economic conditions warrant. I think the market will probably have a good rest of the week as window dressing continues to add to gains in stocks that already had a stellar start to 2012. However, I believe the second quarter will be a different story and is likely to play out similarly to 2011 as some of the same issues are still present (the crisis in Europe, anemic domestic GDP growth, rising gas prices…etc). I plan to be more defensive in the second quarter and will allocate more of my portfolio to defensive, high yielding stocks. I have a shopping list of stocks I am looking to buy if they pull back. One stock I am looking to pick up for under $60 so it yields 6% is Holly Energy Partners (NYSE:HEP).

Holly Energy Partners - "Holly Energy Partners, L.P. operates a system of petroleum product and crude oil pipelines, storage tanks, distribution terminals, and loading rack facilities." (Business Description from Yahoo Finance)

6 reasons Holly is a solid dividend play at under $60 a share:

  • It currently pays a solid 5.8% dividend and has doubled its payouts since coming public in 2004. It has increased distribution payments for 29 straight quarters.
  • Consensus earnings estimates for both FY2012 and FY2013 have increased significantly over the past two months.
  • Its 2500 miles of pipelines throughout the southwest are not impacted by fuel prices as it only provides transport services.
  • HollyFrontier Corporation (NYSE:HFC) still retains a 42% interest in HEP. It also provides most of the fuel put through its pipelines which gives the company a stable source of revenues and supply.
  • This is a low beta (.65) play that S&P projects will have 12% annual EPS growth on average over the next three years. S&P also has a "Buy" rating and a $68 price target on HEP.
  • Holly Energy Partners holds an option to purchase the UNEV Pipeline from HFC. This would open up the Las Vegas market if HEP decided to exercise the option. It also just raised $300mm with a very reasonable 6.5% offering through 2020.
Source: 6 Reasons Holly Energy Partners Is A Solid Dividend Play