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Investing Topics: Dividend Stocks

Risks and Opportunities

Most energy-related equities have taken some serious lumps since the second half of last year, hit by the precipitous decline in the prices of crude oil, natural gas and natural gas liquids (NGL).

With the exception of US independent refiners, most groups in the energy sector have pulled back since the end of last year’s second quarter.

The Alerian MLP Index, which tracks 50 prominent publicly traded partnerships, has pulled back by 17 percent. This resilience reflects the group’s focus on pipelines and other midstream infrastructure that often operates under longer-term, fee-based contracts.

MLPs’ above-average yields also make them popular among buy-and-hold retail investors, while their unique structure helps unitholders to defer taxes—until they exit their positions. This setup makes for a relatively stable investor base.

Although we expect MLPs to continue to outperform relative to other energy groups, investors shouldn’t overlook the headwinds facing these stocks and the potential for further downside.

Rather than viewing the space holistically, investors need to evaluate each MLP’s individual strengths, weaknesses and growth prospects.

In this issue, we review some of the risks in the MLP space, set dream prices for our favorite blue-chip MLPs and highlight a handful of names that offer exposure to growth stories that are independent of commodity prices or driven by drop-down transactions from supportive general partners.

High-Yield MLPs: The Good, the Bad and the Ugly — Part 1

With more than two dozen non-upstream MLPs yielding more than 8 percent, many investors who followed our leading during the bloodbath of 2008-09 wonder whether they should buy the dip. We kick the tires on half these high yielders to determine which ones to buy, hold and sell. Remember that our favorite MLPs appear in our Model Portfolios.

  • Live Chat with

    Elliott and Roger on Apr. 7, 2015

  • Portfolios & Ratings

    • Model Portfolios

      Balanced portfolios of energy stocks for aggressive and conservative investors.

    • Coverage Universe

      Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.

    • MLP Ratings

      Our assessment of every energy-related master limited partnership.

    • International Coverage Universe

      Roger Conrad’s coverage of more than 70 dividend-paying energy names.

    Experts

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Peter Staas

      Managing Editor: Capitalist Times and Energy & Income Advisor