Last but certainly not least, a third high-yield basic materials to watch is Delek Logistics Partners LP (NYSE:DKL). Unlike the aforementioned companies, Delek is a smaller cap name that’s focused on the oil and gas transportation services market. Shares have been up more than 30% this year on the back of some massive growth prospects expected from the Street. On average, the six analysts who cover this stock expect earnings to grow from $0.69 a share in 2012 to $1.99 by the end of this year, and by the end of 2014, this estimate rises to $2.21.
Obviously, earnings growth is one key ingredient to dividend growth, and Delek has issued quarterly payments for three consecutive quarters. Cash flows are positive after being poor in 2011, debt levels are about industry average and most analysts hold a generally upbeat outlook on the oil and gas transportation services macro environment. Although liquid fuel use fell slightly last year, the EIA expects modest growth in 2013 and 2014, which will be one driving factor behind Delek’s growth prospects.
Falling or stagnant crude oil prices represent one risk to this bullish outlook, as does a slowing economic recovery in the U.S. If, however, both of these threats fail to materialize enough to affect the earnings of Delek and other energy transportation companies, this could be a nice place to be invested in moving forward. The company reports third quarter earnings on November 4th, so we’ll be keeping a close eye on this date.