The 2nd quarter has been one that investors in the energy sector would like to forget. The fall in oil prices, continued low natural gas prices and macro concerns about Europe and slowing worldwide growth have hurt this space significantly. It has been downright brutal for some of the smaller energy producers as well as the oil service firms. However, every cloud has a silver lining. I am still defensive as I think we still have some selloff left. That being said, I am looking to pick up some stocks in the sector that have sold off; especially high yielding energy MLP's who provide juicy dividends right now. One such play is Calumet Specialty Product Partners (CLMT) which is yielding almost 10% after an approximate 20% selloff in the shares recently, part of it due to the company announcement it will issue another 6mm shares.
Calumet Specialty Products Partners - "Calumet Specialty Products Partners, L.P. produces and sells specialty hydrocarbon products in North America. It operates in two segments, Specialty Products and Fuel Products". (Business description from Yahoo Finance)
6 reasons CLMT is a great pickup for income investors at under $22 a share:
- CLMT yields 9.8% and has been raising distribution payments steadily over the last few years.
- Insiders have been net buyers of the stock over the last year, recently making new purchases in May at higher prices.
- The stock is selling for just over 9 times forward earnings and consensus estimates for FY2012 have actually gone up over the past month even as the stock was falling.
- Very few analysts cover this vehicle. However, S&P has a $30 price target on CLMT. Zacks also has a "Strong Buy" on the shares.
- The company should continue to benefit from crack spreads that are better than 2011.
- CLMT gets significant amount of its revenues from specialty products which have much higher margins and also do well in an expanding economy than the typical refiner.