Master Limited Partnerships (MLP) is known as a popular way for investors to collect dividend income. This popularity has led to several ETFs that only invest in MLPs. However, these MLP ETFS have lagged behind the market in returns. ALPS Alerian MLP ETF (AMLP) is an MLP ETF that has produced a 12% market return in the past year. This is significantly below the S&P 500 return of 25%. Investors should avoid the MLP ETFs and invest directly in individual MLP stocks. I have analyzed 2 MLPs that have been increasing their dividends and are still undervalued. These MLPs offer a growing income stream and potential for price appreciation in the coming year.
Calumet Specialty Products Partners, L.P. (CLMT) is a master limited partnership and is a leading independent producer of high-quality, specialty hydrocarbon products in North America. Calumet processes crude oil and other feedstocks into customized lubricating oils, solvents, waxes and asphalt used in consumer, industrial and automotive products. June 30, 2012 of $65.7 million compared to a net loss of $7.7 million for the same quarter in 2011. For the six months ended June 30, 2012, Calumet reported net income of $117.6 million compared to a net loss of $3.5 million for the same period in 2011. On July 20, 2012, the Company declared a quarterly cash distribution of $0.59 per unit on all outstanding units, or $35.9 million for the second quarter of 2012. This quarterly distribution represents an increase of 5.4% over the first quarter of 2011 and a 19.2% increase from the second quarter of 2011. Calumet has a current dividend yield of 7.85% which has increased 31% over the last three years.
Calumet is projected to grow EPS 12% in 2013. Calumet has an equity summary score of 8.0 out of 10 for a Bullish Outlook. Calumet has a 12-month target price of $42.
Sunoco Logistics Partners L.P. (SXL), headquartered in Philadelphia, is a master limited partnership that owns and operates a logistics business consisting of a geographically diverse portfolio of complementary pipeline, terminalling and crude oil acquisition and marketing assets.
Operating income for the second quarter 2012 increased to a record level compared to the prior year period due primarily to expanded crude oil volumes and margins which were the result of expansion in our crude oil trucking fleet and market related opportunities in West Texas. Operating results were further improved by increased volumes from the assets acquired from Texon L.P. in the third quarter of 2011.
Sunoco Logistics Partners' net income attributable to partners for the second quarter 2012 of $152 million ($1.28 per unit diluted), compared with $94 million ($0.80 per unit diluted) for the second quarter 2011. Additionally, Sunoco Partners LLC, the general partner of the Partnership, declared a cash distribution for the second quarter 2012 of $0.47 per common unit ($1.88 annualized). This represents a 10% increase over the first quarter 2012 cash distribution of $0.4275 per common unit ($1.71 annualized) and a 16% increase over the second quarter 2011 distribution of $0.4050 per common unit ($1.62 annualized). Sunoco Logistics Partners has a current dividend yield of 3.95% and a 5-year average annual dividend growth rate of 10.98%.
Sunoco Logistics Partners has several projects in process to increase their fee-based services in 2013. Permian Express Phase I, a crude oil pipeline project currently in open season, provides West Texas producers and Gulf Coast refiners with a fast and flexible crude oil solution. It is expected to be operational in the first quarter of 2013 at an initial capacity of 90,000 barrels per day, with full capacity of 150,000 barrels per day on-line in the second half of 2013.
Allegheny Access, a refined products pipeline project currently in open season, will transport refined products from the Midwest to markets in eastern Ohio and western Pennsylvania. It is expected to be operational in the first half of 2014 with an initial capacity of 85,000 barrels per day and will be expandable to 110,000 barrels per day.
Sunoco Logistics Partners has a projected 5-year EPS growth rate of 20%. Sunoco Logistics Partners has an equity summary score of 9.8 out of 10 for a Very Bullish Outlook. Sunoco Logistics Partners has a 12-month target price of $52.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.