A 10% Yielder Worthy Of Consideration For Income Investors

Oct.28.12 | About: LRR Energy (LRE)

Finding decent yield continues to be challenging in this market and probably will remain so at least in the near term due to the Federal Reserve's policies. One area I continue to like to find yield is the energy sector, primarily MLPs that pay out 90% of their earnings in distributions. One recent MLP that has caught my eye is below.

LRR Energy, L.P. (NYSE:LRE) operates oil and natural gas properties in North America. The company holds interests in various assets located in the Permian Basin region in west Texas and southeast New Mexico; the Mid-Continent region in Oklahoma and east Texas; and the Gulf Coast region in Texas.

7 reasons LRE is still a solid income pick at just over $19 a share:

  1. LRE yields close to 10% (9.9%).
  2. Oppenheimer just upgraded the shares to Market Outperform and put a $24 price target on the shares.
  3. The company recently raised production guidance for the second half of 2012 from 5,900-6,300 boe/d to 6,100-6,400 boe/d.
  4. Insiders have bought over $500K worth of shares over the past six months.
  5. The median price target held by the five analysts that cover the stock is $22 a share:
  6. Almost 60% of the company's production is natural gas. NG prices are more than 50% from their lows earlier in the year improving sentiment on the sector and stock.
  7. The company has a stable of assets with proven reserves, an experience management team, a solid balance sheet and its production is well hedged. In short, it is well-run stable outfit that pays an outsized dividend and good pick to put in an income portfolio.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in LRE over the next 72 hours. 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.