TEPPCO Partners: A Pipeline For Profits?

May. 9.08 | About: TEPPCO Partners (TPP)

I am a long term owner of Teppco (TPP). This stock, currently paying a well-supported 8.19% dividend (recently raised for the third time in the last four quarters) is trading well below its 200-day average at $34.66 per share.

Down from a high of $46.20 last May and seemingly bottomed from a low of $32.91 in late March, TEPPCO has not met street earnings expectations due in large part to recent acquisition synergies, early repayment of debt instruments and hedging. These are in the past. TEPPCO has a solid management team that is trading away under performing assets and acquiring businesses that should excel over the long term. Not just your average pipeline company, TPP aims to maneuver into a comprehensive energy transportation system.

TEPPCO Partners is a carrier of refined petroleum and liquefied petroleum gases. The company owns and operates petrochemical and natural gas liquids pipelines, engaged in crude oil transportation, storage, gathering and marketing, owns and operates natural gas gathering systems and owns the Seaway Crude Pipeline Company, Centennial Pipeline and the Jonah Gas Gathering Company. TPP also has an undivided interest in the Basin Pipeline.

TEPPCO operates in three business segments: transportation, marketing and storage of refined products and petrochemicals; gathering, transportation, marketing and storage of crude oil and distribution of lubrication oils and speciality chemicals; and the gathering of natural gas, fractionation of natural gas liquids and transportation of same.

Analysts are neutral to a bit bearish on the company, mainly because of the aforementioned earnings dip. I believe this presents an opportunity for contrarians to pick up TPP cheaply with a superb tax-advantaged dividend floor.

TEPPCO is a company moving forward. Although the past year has not produced the stellar earnings the analysts and I expected, its future looks very bright. Holding this stock through both thick and thin as a dividend play has been strategically successful for me. Now, the promise of company performance to propel the stock price upwards may be more than a pipe dream.