For income investors looking for high yield with solid growth potential, energy MLP's can offer some good prospects. This is especially true as low natural gas prices are driving utilities and industrial uses to shift demand over from coal. One stock, El Paso Pipelines (NYSE:EPB), has compelling valuations and good future distribution growth.
El Paso Pipelines - "El Paso Pipeline Partners, L.P. engages in the interstate storage and transportation of natural gas in the United States". (Business Description from Yahoo Finance)
6 reasons EPB offers a solid value proposition for income investors at just over $33 a share:
- The stock yields 6% and has quadrupled its distribution since its first payout in January 2008. It just announced Friday it is upping the payout again by 2%.
- Its assets are located in the Rocky Mountain and Southeastern regions of the country. Both of which are predicted to have greater population growth than the nation as a whole in the next decade.
- The company is picking up some nice assets as the result of divesture from the acquisition of El Paso (EP) by Kinder Morgan Energy Partners (KMP).
- For a high yielder, it is priced attractively under analyst's price targets. The consensus price target of the 11 analysts that cover the stock is $39. Credit Suisse also has a $39 a share price target and an "Outperform" rating on the stock.
- Pipeline integrity expenses which have hurt margins recently should come to an end by the year. It also operates on a fee-based basis so is not impacted by low natural prices.
- The stock has solid technical support in the $32 to $34 range (See Chart)