Should You Buy This 12% Dividend Yield?

Niska Gas Storage Partners LLC (NKA) is an independent owner and operator of natural gas storage assets in North America.  Niska Partners owns or contract for approximately 204.5 billion cubic feet of total gas storage capacity.  As of March 31, 2011, the Company’s total working gas capacity to 204.5 billion cubic feet.  Niska Partners store natural gas for a range of customers, including financial institutions, marketers, pipelines, power generators, utilities and producers of natural gas.  The Company provides multi-year, multi-cycle storage services to its customers under long term firm reserved storage (LTF) contracts.  The volume-weighted average life of its LTF contracts at March 31, 2011, was 2.6 years.  The Company also provides services for customers under short term firm storage (STF) contracts. STF contracts typically have terms of less than one year.

NKA closed today at $12.07, up 4.23% on the day.  NKA is a dividend play with a current yield of 12% paid on a quarterly basis.  NKA missed their earnings estimated significantly last quarter and their stock was punished badly.  The earnings miss created concern that the dividend would be cut in the future.  However, this is less likely as analysts have been upgrading the stock this month.

On April 24 2012, Niska Gas Storage Partners LLC has been upgraded to Market Perform from Underperform at Wells Fargo.  Price target was raised to $9-$12 from $6-$9.


On April 14 2012, Columbine Capital Services, Inc. upgraded NISKA GAS STORAGE PARTNERS LLC from NEUTRAL to FAVORABLE.

On April 5 2012, Audit Integrity, Inc initiated coverage for NISKA GAS STORAGE PARTNERS LLC with a 3 recommendation.

Bottom line: The analysts upgrades may be signalling stability in the stock.  NKA doesn’t report earnings until 6/5 so keep this stock on your watch list.  If there is no dividend cut and earnings improve, this stock will continue to increase in price.  This is an aggressive investment so it is more speculative today until it plays out in the next few months.