10 Energy Stocks with Yields Up to 11%

BOSTON (TheStreet) -- Master limited partnerships, or MLPs, are required to pay hefty quarterly distributions to shareholders in exchange for avoidance of corporate income taxes. That's a boon to investors surrounded by skimpy dividends and bond yields.

MLPs are typically involved in the oil and gas business, specifically exploration, storage and transportation. MLPs offer some of the highest yields in the stock market, but their distributions are taxed differently than dividends. Often, the majority of quarterly payouts are tax-deferred, making MLPs even more attractive income investments. MLP investors receive a K-1 form annually, indicating the tax treatment of the previous four payouts.

Here are 10 MLPs with enormous yields. Each yields between 7.2% and 11%. Although MLPs are more complicated than traditional equities, they have proven to be outstanding income investments and operate reliably profitable businesses, particularly noteworthy in today's sputtering economy. Below, they are ordered by yield, from high to highest.

10. NuStar Energy ( NS) terminals, stores and transports petroleum products. Second-quarter net income increased 19% to $99 million, but earnings per share climbed just 3% to $1.43, hurt by a higher share count. Revenue grew 14%. The operating margin rose from 8.5% to 9.1%. NuStar's stock sells for a book value multiple of 1.4 and a sales multiple of 0.9, 64% and 49% discounts to peer averages. Of analysts evaluating NuStar, four, or 29%, rate its stock "buy", eight rate it "hold" and two rank it "sell." A median price target of $61.40 suggests a return of 3.3%.

9. Global Partners ( GLP) is a wholesale distributor of oil and natural gas. The company swung to a second-quarter loss of $1.1 million, or 7 cents a share, from a profit of $980,000, or 7 cents, a year earlier. Revenue grew 27%. The operating margin narrowed from 0.4% to 0.2%. Global Partners shares trade at a forward earnings multiple of 11, a book value multiple of 1.8 and a sales multiple of 0.1 -- 14%, 55% and 97% discounts to oil and gas peer averages. One analyst rates the stock "buy" and three rank it "hold." A median target of $25.50 implies 2% upside.

8. Linn Energy ( LINE) is an independent oil and gas developer. Linn swung to a second-quarter profit of $60 million, or 40 cents a share, from a year-earlier loss of $268 million, or $2.31. The operating margin climbed to 51%. Linn's stock trades at a book value multiple of 1.6, a 60% discount to the industry average. It's expensive based on forward earnings, sales and cash flow. Six, or 86%, of researchers following the company advise purchasing its shares and one recommends holding. None say to sell. A median target of $34.17 suggests a return of 12%.

7. Exterran Products ( EXLP) sells natural-gas compression services. Exterran swung to a second-quarter loss of $1.4 million, or 7 cents a share, from a profit of $2.7 million, or 13 cents, a year earlier. Revenue advanced 19% to $54 million. The operating margin fell from 24% to 8.2%. Exterran's stock sells for a book value multiple of 2.1, a 17% discount to its oil and gas peer average. It's costly based on forward earnings, sales and cash flow per share. Three analysts rate the stock "buy" and one ranks it "hold." A median target of $28.50 implies 32% upside.

6. Vanguard Natural Resources ( VNR) develops oil and natural gas properties in the U.S. It swung to a second-quarter profit of $3.9 million, or 19 cents a share, from a loss of $6.8 million, or 54 cents, a year earlier. Revenue multiplied to $25 million. The operating margin turned positive. Vanguard's stock trades at a forward earnings multiple of 12, a 13% discount to the oil and gas industry average. It's expensive based on book value and cash flow. Four analysts rate it "buy" and one ranks it "hold." A median target of $26.62 suggests a return of 3.7%.

5. Legacy Reserves ( LGCY) develops oil and gas properties in the Permian Basin, Mid-continent and Rocky Mountain regions of the U.S. Legacy swung to a second-quarter profit of $39 million, or 98 cents a share, from a loss of $57 million, or $1.83, a year earlier. Legacy's stock sells for a book value multiple of 2.5, a 38% discount to its peer average. The stock is expensive based on forward earnings, sales and cash flow. Of analysts following Legacy, five advise purchasing its shares and one suggests selling. A median target of $25.80 implies 8% upside.

4. EV Energy Partners ( EVEP) owns oil and gas properties in the Appalachian Basin, Louisiana, Michigan and Texas. It swung to a second-quarter profit of $16 million, or 50 cents a share, from a loss of $32 million, or $1.93, a year earlier. Revenue surged 52%. The operating margin turned positive. EV's stock trades at a book value multiple of 1.4, a 65% discount to the industry average. It's fairly valued based on forward earnings. Of analysts covering the stock, two rate it "buy" and two rate it "hold." A median target of $37.83 suggests a looming return of 10%.

3. Cheniere Energy Partners ( CQP) operates the Sabine Pass liquid natural-gas terminal. Second-quarter profit advanced 39% to $58 million, or 35 cents a share, as revenue increased 36% to $130 million. The operating margin inched up from 78% to 79%. Cheniere's stock is fairly valued, based on its forward earnings multiple of 13. However, it's overpriced based on book value, sales and cash flow per share. One analyst advocates buying the shares and one counsels holding. Citigroup ( C) values the stock at $11, suggesting 40% of downside.

2. Martin Midstream Partners ( MMLP) transports and stores petroleum products in the Gulf Coast region. Second-quarter profit tumbled 71% to $3.1 million, or 10 cents a share, as revenue climbed 52% to $212 million. The operating margin declined from 7.8% to 4.3%. Martin Midstream's stock trades at a book value multiple of 2 and a sales multiple of 0.7 -- 51% and 59% discounts to peer averages. It's costly based on trailing and forward earnings. One researcher rates the stock "buy" and three rank it "hold." A median target of $34 implies 9% upside.

1. Encore Energy Partners ( ENP) develops oil and gas properties. Encore swung to a second-quarter profit of $26 million, or 58 cents a share, from a year-earlier loss. Revenue grew 22% to $45 million. The operating margin jumped from 9.4% to 30%. Encore's stock trades at a book value multiple of 2.1, a 48% discount to the oil and gas industry average. It's expensive based on forward earnings, sales and cash flow. Of analysts covering Encore, one rates its stock "buy", three rate it "hold" and one ranks it "sell." A median target of $20 implies 8.9% upside.

-- Written by Jake Lynch in Boston.

RELATED STORIES:


Become a fan of TheStreet on Facebook.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

More from How-to

How to Retire Rich - 25 of the Best Secrets We Learned in 2018

How to Retire Rich - 25 of the Best Secrets We Learned in 2018

Trade and Tariffs Could Impact the Yield Curve -- Here's How

Trade and Tariffs Could Impact the Yield Curve -- Here's How

How to Take an Early Retirement in 8 Steps

How to Take an Early Retirement in 8 Steps

Is General Electric Stock Still Good for Your Retirement Account?

Is General Electric Stock Still Good for Your Retirement Account?

What Is Return on Equity and Why Does It Matter?

What Is Return on Equity and Why Does It Matter?