Given the poor jobs market, the contraction in Europe and concerns on slowing worldwide growth is likely to make for a very rocky summer for equities. I have noticed that the high yielding part of portfolio has outperformed my equity only picks and the market overall. I have most of my income portfolio in three key areas: (A) Energy MLP's like Linn Energy (LINE), (B) Unique property REITs like Chatham Lodging Trust (CLDT) and (C) Business Development Companies like Hercules Technology Growth Capital (HTGC). One interesting stock that I have come across in the latter category is NGP Capital Resources (NGPC). It has an over 7% yield, strong balance sheet, insider buying and has a unique position to help finance and monetize the fast growing domestic energy industry.
"NGP Capital Resources Company is a business development company specializing in investments in small and mid size and middle market companies. The firm typically invests in acquisitions, buyouts, growth and development, revitalization, restructuring, recapitalizations, and special situations. It invests in energy companies with a focus on oil and gas exploitation, development, and production business." (Business description from Yahoo Finance)
7 reasons NGPC makes sense for income investors at just over $7 a share:
- Insiders have been steady buyers of the stock for the last year. The company also bought back 250,000 shares in May as well.
- It pays a robust yield of 7.3% which should go up if it hits analyst predictions of 82 cents a share in earnings in FY2013.
- NGPC is significantly under its Net Asset Value and is priced at just 77% of book value
- It has over $70mm in net cash or over 40% of market capitalization on its books.
- NGPC is cheap at less than 9 times forward earnings and just three times operating cash flow.
- The company is ideally situated to supply financing on solid terms to a fast growing part of the economy in the domestic energy distribution and production sectors.
- The stock has good technical support at $6, has improving momentum and just crossed its 200 day moving average (See Chart)