Stock Screens

Stock Screen: Oil and Gas Transport Plays


Quick: name an industry group where the average dividend yield is hovering around 11%. If you guessed utilities, real estate investment trusts (REITS), or banks, you're wrong. But if you guessed oil and gas transportation companies, that would be correct.

Most oil and gas pipeline companies are set up as Master Limited Partnerships (MLPs), which means they must, by law, distribute their earnings, just like REITs do. That makes them good choices for income-focused investors, in our view.

"The distribution—or dividend—level is a very important driver of investor interest in this group," explains Tanjila Shafi, a Standard & Poor's equity analyst. "The companies know this, so they are working very hard not to cut the payouts. They are doing other things like cutting capital expenditures to preserve capital, just to maintain the distribution levels."

Shafi recommends only six MLPs, and believes all six should be able to maintain their distribution levels this year. She also believes that they, as a group, are the strongest companies in the industry, have good balance sheets, and are more likely to be able to tap the capital markets. She notes investors may find other MLPs with higher dividend yields, but recommends for purchase only these six, each of which carries an S&P investment ranking of 4 STARS (buy) or 5 STARS (strong buy).

ompany Ticker S&P STARS Rank (2/12/09)

Energy Transfer Partners ETP 4

Kinder Morgan Energy Partners KMP 5

Magellan Midstream Holdings MGG 4

NuStar Energy NS 4

Oneok Partners OKS 4

Plains All American Pipeline PAA 4

Piskora is managing editor of U.S. Editorial Operations for Standard & Poor's .

All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure

Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.

Piskora is managing editor of U.S. Editorial Operations for Standard & Poor's

American Apparel's Future
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus