Full Steam Ahead For This 9% Yielding Niche LP In The Second Half Of 2017

Summary

  • This LP yields over 9% with 1.2x coverage.
  • All of its new assets will kick in for Q2 and Q3.
  • Management expects its earnings for Q2 2017 to be significantly higher than Q1.
  • It should go ex-dividend in two weeks.

Are you interested in high-yield niche plays with strong earnings records? Then maybe you should book a passage on KNOT Partners LP (NYSE:KNOP), a niche shipping stock we've covered previously in several articles.

Profile: KNOT Offshore Partners LP owns and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides crude oil loading, transportation, and storage services under time charters and bareboat charters. KNOT Offshore Partners GP LLC serves as the general partner of the company, and Knutsen NYK Offshore Tankers AS is its sponsor. The company was founded in 2013 and is headquartered in Aberdeen, UK.

Management has grown KNOP's fleet rapidly since the 2013 IPO - it started with just four vessels, and now, after the latest drop-down acquisitions in 2017, it has 13 vessels (225% asset growth in four years).

Shuttle tankers comprise only around 1% of the world's conventional tanker fleet, but they're an important link for oil companies - many ports don't have the infrastructure to accommodate large tankers, so KNOP's customers charter its shuttle tankers to get their oil into port. These are specialized vessels, which take 2.5-3 years to build, so there isn't a lot of speculative newbuilding going on in this industry.

KNOP has another advantage - a young fleet - its fleet of 13 vessels has an average age of 4.6 years vs. an average of around 12 years for the rest of the industry's shuttle tankers.

Like many of the companies we cover, KNOP operates on long-term contracts, with strong counter-parties, such Royal Dutch Shell (RDS.A) (RDS.B), Exxon Mobil (XOM), and Statoil (STO), among others. Currently, it has an average of 4.8 years duration left, with an additional four-plus years of option extensions:

(Source: KNOP site)

2 New Assets: On 3/1/17, management completed its acquisition of

This article was written by

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 KNOP, XOM, RDS.B. 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.

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