Filings with the SEC have disclosed that two insiders at Access Midstream Partners LP (NYSE:ACMP) bought the stock on December 24th. CEO Michael Stice bought 9,000 shares at an average price of $33.60 per share- increasing his direct stake in the company by about 50% to a little over 27,000 shares- while Board member David Daberko now owns a little over 14,000 shares after buying 6,000 shares of the stock at a slightly lower price. Access Midstream currently trades at $32.70, down just a bit from where these insiders bought. Studies show that stocks bought by insiders tend to beat the market- though not always- and this makes sense to us as insiders should prefer to diversify their investments unless they are particularly confident in the stock (read more about studies on insider trading). Our reading of academic work on insider trading has convinced us that seeing multiple insiders buy, as has happened here, is a particularly interesting signal. Learn more about consensus insider purchases.
Access Midstream, unsurprisingly, operates gathering and other midstream services for natural gas in the onshore U.S., where a boom in natural gas production has somewhat outpaced available infrastructure. Access Midstream recently purchased substantial midstream assets from Chesapeake Energy Corporation (NYSE:CHK); the company itself was a Chesapeake spinout in 2008, and was known as Chesapeake Midstream Partners until this past July. The most recent 10-Q showed revenue up 11% from the third quarter of 2011, though earnings growth was more modest and earnings per share actually declined slightly.
Access Midstream has increased its dividend payment each quarter since it began paying dividends in November 2010. That’s not a particularly long history of paying dividends, of course, but it is a good sign that the company has had enough cash to keep that streak going (though cash balances were low at the end of September, we can hope that if the company can buy assets it can make dividend payments). If we assume that it halts its dividend increases, the yield at current prices is 5.3%. That’s certainly high enough to merit consideration as an income stock even ignoring the potential for dividends to increase further. The beta is 0.3, so the stock would seem to have some downside protection from poor economic conditions as well. Valuation isn’t great with Access Midstream trading at 20 times consensus earnings for 2013, but we think that there are enough opportunities in its industry to at least protect its financials from deteriorating too much.