1 Energy Stock to Avoid: NuStar Energy L.P. (NS)

Right now, NuStar Energy L.P. (NYSE:NS) sports an 8.7% yield and an annualized distribution of $4.38 per unit, which is one of the higher yields going in an industry known for its payouts. However, NuStar’s distribution coverage for the fourth quarter was not ideal, coming in at 0.67 times, slightly better than its full year coverage of 0.63 times. Compare that to the full-year or fourth-quarter distribution coverage for other midstream players:

• Plains All American Pipeline, L.P. (NYSE:PAA) , full year 1.51 times
• Kinder Morgan Energy Partners LP (NYSE:KMP) , fourth quarter 1.16 times
• Enterprise Products Partners L.P. (NYSE:EPD) , full year 1.3 times

Anything over 1.0 is a strong coverage ratio, anything below it calls into question a partnerships ability to continue to pay its distribution, so the downgrade from Credit Suisse does not seem that unwarranted.

Foolish takeaway
This may be rock bottom for NuStar Energy L.P. (NYSE:NS), and while I certainly wouldn’t advocate buying it right now, I do think the focus on fee-based revenue and building out its Eagle Ford assets bode well for the future. The first-quarter earnings call should give investors some more insight about the future of NuStar, regardless of what happens with the TexStar NGL pipe.

The article 1 Energy Stock to Avoid originally appeared on Fool.com and is written by Aimee Duffy.

Fool contributor Aimee Duffy owns shares of Plains All American Pipeline, L.P. Click here to see her holdings and a short bio. If you have the energy, follow her on Twitter, where she goes by @TMFDuffy. The Motley Fool recommends Enterprise Products Partners L.P.

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