Oil companies are often characterized by high capital involvement and as such, are not considered great dividend paymasters. While this assessment is largely true, there are some exceptions. Calumet Specialty Products Partners, L.P (NASDAQ:CLMT), Ferrellgas Partners, L.P. (NYSE:FGP), and NGL Energy Partners LP (NYSE:NGL) fall in the latter category with dividend yields in excess of 6.5%. However, there is more to these stocks than just great dividends.
Calumet Specialty Products Partners, L.P (NASDAQ:CLMT) is a North American producer of specialty hydrocarbon products. Apart from refined petroleum products such as gasoline, diesel, jet fuel, and heavy fuel oils, its products include customized lubricating oils, white mineral oils, solvents, and waxes. The stock has moved north 26% in the last quarter or so, but still offers a dividend yield close to 7% at its current market price.
Due to the company’s exposure to high margin specialty products, it witnessed a steady net profit margin of 4.4% throughout 2012. This level of profit margin is reserved for big oil refiners. Another positive factor for the company is its recent ground breaking of its Dakota Prairie refinery in North Dakota to benefit from the burgeoning Bakken Shale. Although it will take about 20 months to complete, investors are buoyed by the prospects.
NGL Energy Partners LP (NYSE:NGL) operates a vertically integrated propane marketing and distribution business. The stock has moved up more than 10% over the last one month, but still offers a dividend yield of 6.8%. Other valuation metrics also indicate that the company is worth a closer look. Falling propane prices forced it to look at alternatives last year. The company made four acquisitions in the nine months ending Dec. 31 by paying $53.3 million in cash and assuming $1.3 million in long-term debt.
The most prominent among these buyouts is that of High Sierra in June last year, as it has catapulted the company’s finances to new heights. As a result of the acquisition, NGL Energy Partners LP (NYSE:NGL)’s nine month revenue grew to $2.8 billion from $871 million in the same period last year.
At current prices, the stock is valued at 30 times earnings; however, it reduces to a multiple of just 15 on a forward basis, underlining the impact of the High Sierra acquisition.