This 9% Yielder Is Determined To Get Bigger

| About: Eagle Rock (EROC)

Eagle Rock Energy Partners (NASDAQ:EROC) has been a core part of my income portfolio since earlier in the year. I am even more positive on its future given its recent positive news, as well as its improving long-term growth prospects (see below). Investors looking for high yield combined with growing cash flow and increasing distribution payouts should definitely consider purchasing shares of EROC at these levels.

Here are some recent positive events for EROC:

  • Anadarko (NYSE:APC) announced it is dedicating production on 800,000 acres to be transported by EROC under a new long-term fee structure. This is a huge positive for EROC's long-term growth.
  • This follows the successful completion of the acquisition of a 2,500-mile gathering system in the liquid-rich Texas Panhandle from BP America Production Company's Sunray and Hemphill processing plants. EROC also entered into a 20-year agreement to transport this production. Another transaction supportive of long-term growth.
  • The $84 million offering EROC initiated to help pay for this important acquisition was oversubscribed, showing investors have confidence in the company's allocation decisions.
  • It was named a top 25 dividend play in Forbes in late August.
  • Bank of America initiated the shares as a "Buy," with an $11 price target in late August as well.

According to the business description from Yahoo Finance, "Eagle Rock Energy Partners engages in gathering, compressing, treating, processing, transporting, marketing, and trading natural gas, as well as fractionating and transporting natural gas liquids."

Here are four reasons why EROC is a solid pick for income investors at under $10 a share:

  1. EROC yields 9% and has increased its payout by some 50% over the past two years.
  2. Analysts already expected close to 20% revenue growth in FY 2013, with the Anadarko acreage dedication that should get bumped higher. The company is going to be a player on the expanding use and distribution of natural gas in the coming years.
  3. In addition to Bank of America, TheStreet also has a "Buy" rating and a $11 price target on the stock.
  4. The company has doubled operating cash flow over the past three years, and EROC sells at just 9 times OCF.

Disclosure: I am long EROC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.