A stock fit for a king
Oil and natural gas royalty trusts have received a pretty bad rap over the past year, with many falling after deeper analysis revealed they were trading well above their projected lifetime dividend payouts. However, that’s not the case for SandRidge Mississippian Trust II (NYSE:SDR), which was slammed by a price target cut by Wunderlich Securities and a full-fledged downgrade to “underperform” by Raymond James.
The reason for the avoidance of this trust relates to SandRidge Mississippian II’s announced quarterly payout of “just” $0.532557 when Wall Street was expecting much more. Apparently, SandRidge Mississippian II’s Permian Basin assets are turning up more natural gas and less liquid fuels than expected and, with natural gas prices still well off their highs, profits have been stymied. This really isn’t a big deal, however, as the Obama administration has made it very clear that clean-burning fuels like natural gas will be vital for creating an energy-independent U.S. This means a long-term bullish outlook for natural gas prices, in my opinion.
Let’s not forget, as well, that multiple electric utilities have been actively transitioning from coal to natural gas for the cost savings and long-term waste-generating aspects. This only further supports the notion that natural gas will remain in high demand and that SandRidge Mississippian, with its 13% yield, will be a major income producer for years to come for investors.
Foolish roundup
As has been the trend lately, I’m focused on ignoring short-term negatives and seeing the positives three to five years down the road. A spike in mobile demand will translate to big gains for Peregrine Semiconductor; an irrationally complacent market will give way to moderate fear as growth in the U.S. and Europe slows, spurring higher gold prices; and increasing natural gas acceptance will spur demand for SandRidge Mississippian Trust II.
I’m so confident that these three names will bounce off their lows that I’m going to make a CAPScall of outperform on each one.
The article 3 Stocks Near 52-Week Lows Worth Buying originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Apple and SandRidge Mississippian Trust II. Motley Fool newsletter services have recommended buying shares of, and creating a bull call spread position in, Apple.
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