Oversold 9% Yielder At 52-Week Lows, Estimates Rising, Long-Term Upside Potential


  • This stock yields 9.29% and is 26% below analysts' average price target.
  • It has had some rough quarters, but it's in the hottest production region in its industry and has projects coming online in 2017 that should sustain future growth.
  • Investors with a long-term focus can pick up shares at 52-week lows.
  • We offer two additional actionable trades to hedge your bet - 1 with a breakeven 12% below the 52-week low.

Have you ever had to hold your nose when betting on the future? Life would be so much easier with a dependable crystal ball, but thus far even Amazon (AMZN) isn't selling any of those.

We came across Plains All American Pipeline, L.P. (NYSE:NASDAQ:PAA), a midstream pipeline high dividend stock, on a bottom fishing expedition this week, and its chart is a real stinker - it's hitting 52-week lows and looks oversold on its stochastic chart (although it has looked oversold before on its way down):

(Source: finviz)

We figured that analysts must have been ganging up on PAA, with multiple downgrades, etc., but it's the exact opposite - it has a lot of upward earnings estimate revisions over the past 30 days for Q2 and Q3 '17, and also for full years 2017 and 2018:

(Source: YahooFinance)

After its downward slide, PAA is now 26% below analysts' consensus price target of $32.02. It made us wonder what analysts were seeing that investors weren't agreeing with:

Earnings: You can hardly blame the market for running away from PAA when you see these declines in net income, EBITDA and DCF over the past four quarters.

Revenue grew over the past three quarters, but the other categories all struggled due to weak commodity prices, customers' delayed spending on new wells, which in turn caused volume declines in PAA's assets, particularly in its Supply and Logistics segment, which had a 37% drop in EBITDA in 2016 and struggled further in Q1 '17 due partially to unseasonably warm weather.

In addition, the company did several secondary offerings over the past four quarters in order to fund acquisitions, many of which aren't yet operational, so they haven't kicked in any earnings yet, but the unit count has surged.

There was also a distribution cut, from $.70 to $.55, in

This article was written by

Double Dividend Stocks profile picture
Target 5-10% yields backed by solid earnings for better portfolio income.

Robert Hauver, MBA, was VP of Finance for an industry-leading corporation for 18 years, and publishes SA articles under the name DoubleDividendStocks. TipRanks rates DoubleDividendStocks in the Top 25 of all financial bloggers, and Seeking Alpha rates us in the Top 5 of several categories, including Dividend Ideas, Basic Materials, and Utilities. 

"Hidden Dividend Stocks Plus", a Seeking Alpha Marketplace service, which focuses on undercovered and undervalued income vehicles. HDS+ scours the world's markets to find solid income opportunities with dividend yields ranging from 5% to 10%-plus, backed by strong earnings.

Disclosure: I am/we are long PAA, PBFX, HEP, MMLP, MPLX, ARCX. 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.

Additional disclosure: We're long PAA via being short PAA puts.

Recommended For You

Comments (80)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.