This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

2 Energy MLPs With Attractive Yields

One stock I like is Niska Gas Storage Partners (NKA - Get Report). Niska is the largest independent owner and operator of natural-gas storage in North America. In total, the company has about 185.5 billion cubic feet of storage capacity. It's only using 55% of that.

Needless to say, the stock's fundamentals aren't the greatest. But the story behind owning this stock is the valuation. Units trade around $9.37 and yield better than 14%. They're also priced at a 27% discount to their book value.

Analysts estimate the market has placed a value on Niska's storage at just $7 million per billion cubic feet, which is less than half of the current market cost to build new storage. The biggest concern surrounding the company was that due to the soft operating environment, the dividend distribution was at risk.

However, the company has taken necessary steps to protect the payout to common unit holders by repurchasing $62 million of debt this year. The company is also in the process of monetizing $200 million worth of its current natural-gas inventory. Thanks to these maneuvers, Credit Suisse analyst Yves Siegel projects Niska will have enough cash to cover the current distribution to common unit holders for the next year and a half. When the operating environment improves, the company will be well positioned due to its size.

nit holders shouldn't expect distribution increases any time soon, but a 14% yield and a unit price below tangible value is a decent-enough incentive.

Risks to consider: In researching this article, this five-year chart of the Alerian index concerned me.

While I'm not a wiggle reader by trade, this is self explanatory, thus confirming why the energy MLP space made me nervous in the first place. Focusing on names that have already been beaten down is a good way to play defense.

Another risk consideration is uncertainty concerning U.S. tax policy. The potential change in the tax treatment of pass-through entities such as MLPs could negatively affect distributions available to unitholders. Widespread economic slowdown would also compound the pullback in commodity prices, which in turn would affect energy MLP prices.

3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
KMP $102.03 1.98%
NRP $5.24 -0.57%
NKA $2.08 -0.48%
OKS $41.04 -0.41%
AAPL $130.35 -1.70%

Markets

DOW 18,093.89 +55.92 0.31%
S&P 500 2,114.46 +5.54 0.26%
NASDAQ 5,055.2170 -5.0290 -0.10%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs