Other midstream companies include Valero Energy Corporation (NYSE:VLO), Murphy Oil Corporation (NYSE:MUR), and Hess Corp. (NYSE:HES). The dividend yields at these peers are considerably lower than at Access Midstream, with a high of about 2%. However, they look considerably better from a value perspective: their trailing P/E multiples are all in the teens or lower, with forward P/Es in the 7-11 range. Net income is down strongly at Valero and Murphy, however; while Wall Street analysts seem confident in a recovery, and even at these lower earnings levels the stock doesn’t look that expensive, that may be enough to avoid buying the stock. Hess experienced high earnings growth last quarter versus a year earlier, and though revenue growth was more modest the stock might be worth considering given its cheap valuation. Chesapeake itself trades at 12 times forward earnings estimates, and has done a decent job of selling off many of its assets to improve its financial position. However, we still don’t think that it’s a good investment (see why we don’t like Chesapeake).
We’re not sure how the acquisition of some of Chesapeake’s assets will impact Access Midstream; M&A tends to destroy shareholder value, but it is at least positive that multiple insiders are buying the stock. The dividend yield is high and we even though the earnings multiples are as well we would expect income investors to be interested in taking a closer look.