Pipeline MLP for yield and price upside
DCP Midstream Partners, LP (NYSE:DPM) has a stated business strategy that includes several of the key components I look for in pipeline master limited partnerships. In particular, it demonstrates the acquisition of midstream (transportation and storage) assets from energy companies and plans to capitalize on organic-growth opportunities. For instance, it intends to expand its gas-gathering systems to increase volume flows, as well as building new properties and broadening the reach of its logistics businesses.
DCP Midstream Partners, LP (NYSE:DPM)’s operations are composed as follows: The sale of natural gas, propane, natural-gas liquids, and condensate contributed 83% of total June-quarter revenue. Another 8% was derived from midstream activities, and 9% stemmed from gains in commodity derivatives.
Accordingly, higher energy prices would assist the company’s results. Besides, it has much room to build its presence in the transport, storage, and processing market. I like DCP Midstream Partners, LP (NYSE:DPM) units as a long-term holding, given favorable dynamics in the industry. They yield about 6% pretax, and the forward P/E is 14.9 times earnings.
Another partnership with room to grow
Global Partners LP (NYSE:GLP) is a company that transports and sells crude oil from the Bakken Shale and Canada. It is one of the largest distributors of gasoline, distillates, residual oil, and renewable fuels in the New England states and New York. Global Partners LP (NYSE:GLP)’s revenue composition is as follows: 68% of 2012 revenue was derived from gasoline sales, while 32% of revenue stemmed from distillate sales.
Like DCP’s, Global’s business strategies revolve around the pursuit of organic growth and expansions that would increase its presence in other fuel such as ethanol, natural gas, and biofuel. It has also started to sell propane. Finally, it is building upon its relationships with convenience stores, partly through the rebuilding and conversion of sites.
Furthermore, Global Partners LP (NYSE:GLP) is aiming to expand its assets, transportation, logistics, and marketing businesses through acquisition. For instance, it acquired Cascade Kelly, a crude-oil facility near Portland, Ore., that helps to extend it pipeline to the West Coast.
Global’s earnings outlook is good, and it is well-situated to benefit from higher prices for oil and natural gas. The MLP units yield around 7.1% pretax, and their forward P/E ratio is 14.8 times forward earnings.
The stocks and MLPs discussed here may appeal to those looking to boost their income in light of a more turbulent market. Moreover, investors may benefit from the capital-gains potential offered here. These holdings would all fit well into a total-return portfolio that targets high dividend yield as well as price gains.
The article 5 Stocks for 5% Dividend Yields originally appeared on Fool.com and is written by Damon Churchwell.
Damon Churchwell has no position in any stocks mentioned. The Motley Fool recommends DCP Midstream Partners, LP and Vodafone. The Motley Fool owns shares of United Online.
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