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10 High Yield Energy Companies Increasing Their Dividends

As earnings season takes focus on the stock market, many energy companies are increasing their dividends.  While some of these energy plays are Bullish and others are Bearish, they are all playing the dividend growth game with investors.  Here are 10 energy stocks increasing their payouts in the past week.

El Paso Pipeline Partners, L.P. (EPB) increased its quarterly cash distribution per common unit to $0.55 ($2.20 annualized) payable on Aug. 14, 2012, to unitholders of record as of July 31, 2012. This represents a 15 percent increase over the second quarter 2011 cash distribution per unit of $0.48 ($1.92 annualized) and an 8 percent increase from $0.51 per unit ($2.04 annualized) for the first quarter of 2012. EPB has increased its cash distribution 17 consecutive quarters since its initial public offering in November 2007.

Bottom line: EPB has a current dividend yield of 6.23%.  It has an equity summary score of 7.8 out of 10 for a Bullish outlook.

Enterprise Products Partners L.P. (EPD) announced that the board of directors of its general partner declared an increase in the quarterly cash distribution rate paid to partners to $0.6350 per common unit, or $2.54 per unit on an annualized basis.  The quarterly distribution will be paid on Wednesday, August 8, 2012, to unitholders of record as of close of business on Tuesday, July 31, 2012. This distribution rate, which represents a 5 percent increase over the $0.6050 per unit distribution rate declared with respect to the second quarter of 2011, is the 41st distribution increase since Enterprise’s initial public offering in 1998 and the 32nd consecutive quarterly increase.

Bottom line: EPD has a current dividend yield of 4.65%.  It has an equity summary score of 7.1 out of 10 for a Bullish outlook.

Kinder Morgan Energy Partners, L.P. (KMP) ) today increased its quarterly cash distribution per common unit to $1.23 ($4.92 annualized) payable on Aug. 14, 2012, to unitholders of record as of July 31, 2012. This represents a 7 percent increase over the second quarter 2011 cash distribution per unit of $1.15 ($4.60 annualized) and is up from $1.20 per unit ($4.80 annualized) for the first quarter of 2012. KMP has increased the distribution 44 times since current management took over in February 1997.

Bottom line: KMP has a current dividend yield of 5.75%.  It has an equity summary score of 6.3 out of 10 for a Neutral outlook.

Western Gas Partners, LP (WES) announced that the board of directors of its general partner has declared a cash distribution of $0.48 per unit for the second quarter of 2012, representing a 4-percent increase over the prior quarter and a 19-percent increase over the second quarter of 2011. The distribution is payable on August 13, 2012, to unitholders of record at the close of business on July 31, 2012.

Bottom line: WES has a current dividend yield of 4.22%.  It has an equity summary score of 6.0 out of 10 for a Neutral outlook.

Targa Resources Partners LP (NGLS) announced today that the board of directors of its general partner has declared a quarterly cash distribution of 64.25¢ per common unit, or $2.57 per common unit on an annualized basis, for the second quarter 2012. The approved distribution represents an increase of approximately 3% over the previous quarter’s distribution and 13% over the distribution for the second quarter 2011. This cash distribution will be paid August 14, 2012 on all outstanding common units to holders of record as of the close of business on July 23, 2012.

Bottom line: NGLS has a current dividend yield of 6.76%.  It has an equity summary score of 5.4 out of 10 for a Neutral outlook.

Williams Company (WMB) also revised its outlook for FY13 downward, projecting EPS of $1.38, down from the prior guidance of $1.55, and below the consensus of $1.60.   WMB continues to expect to pay a full-year 2012 shareholder dividend of $1.20 per share, a 55% increase over 2011. The company confirmed it expects the full-year dividend it pays shareholders in each 2013 and 2014 to increase by 20% to $1.44 and $1.75 per share, respectively.

Bottom line: WMB has a current dividend yield of 3.99%.  It has an equity summary score of 4.8 out of 10 for a Neutral outlook.

Targa Resources Corp. (TRGP) announced today that its board of directors has declared a quarterly cash dividend of 39.375¢ per share, or $1.575 per common share on an annualized basis, for the second quarter 2012. The approved dividend represents increases of approximately 8% over the previous quarter’s dividend and 36% over the dividend for the second quarter 2011. This cash dividend will be paid August 15, 2012 on all outstanding common shares to holders of record as of the close of business on July 23, 2012.

Bottom line: TRGP has a current dividend yield of 3.51%.  It has an equity summary score of 3.6 out of 10 for a Neutral outlook.

Kinder Morgan, Inc. (KMI) reported second quarter cash available to pay dividends of $307 million, up 83 percent from $168 million for the comparable 2011 period. Through the first six months, KMI reported cash available to pay dividends of $610 million, 40 percent higher than $435 million for the first half of 2011. KMI is expected to finish the year significantly ahead of its published annual budget due to its recent acquisition of El Paso Corporation.  The board of directors increased the quarterly cash dividend to $0.35 per share ($1.40 annualized), which is payable on Aug.15, 2012, to shareholders of record as of July 31, 2012. This represents a 17 percent increase over the second quarter 2011 cash distribution per unit of $0.30 ($1.20 annualized) and is up 9 percent from the first quarter 2012 dividend of $0.32 ($1.28 annualized) per share.

Bottom line: KMI has a current dividend yield of 4.0%.  It has an equity summary score of 2.0 out of 10 for a Bearish outlook.

Williams Partners L.P. (WPZ) announced that the regular quarterly cash distribution its unitholders receive has been increased to $0.7925 per unit.  The board of directors of the partnership’s general partner has approved the quarterly cash distribution, which is payable on Aug. 10, 2012, to unitholders of record at the close of business on Aug. 3.  The new per-unit amount is an 8.2-percent increase over the partnership’s distribution of$0.7325 per unit that was paid in August 2011. It is also a 2-percent increase over the partnership’s first-quarter 2012 distribution of $0.7775 per unit.

Bottom line: WPZ has a current dividend yield of 5.63%.  It has an equity summary score of 2.0 out of 10 for a Bearish outlook.

Spectra Energy Partners, LP (SEP) announced that the board of directors of its general partner declared a quarterly cash distribution to unitholders of $0.485 per unit, an increase of one-half cent over the previous level of $0.48per unit. This is the 19th consecutive quarter that Spectra Energy Partners has increased its quarterly cash distribution. The cash distribution is payable on August 14, 2012, to unitholders of record at the close of business on August 3, 2012. This quarterly cash distribution equates to $1.94 per unit on an annual basis.

Bottom line: SEP has a current dividend yield of 6.01%.  It has an equity summary score of 1.5 out of 10 for a Bearish outlook.

The Best MLPs to Own Now

Many of the blue-chip dividend payers are hitting new 52-week price highs.  This is concerning as when price increases, yields will fall.  Because of the soaring popularity of blue-chip dividend payers, more investors are turning to master limited partnerships (MLP).  These are pass-through entities that must pay at least 90% of their taxable income to investors. Many of these issues provide yields double those of blue-chip dividend stocks, and three to four times that of the 10-year Treasury note.

With that in mind, here is a list of MLPs that distribute high dividend yields.  Each company boasts a healthy bottom line already, and should continue to generate income as oil prices rise. As they generate income, so too will their shareholders.

Linn Energy, LLC (LINE), an independent oil and natural gas company, engages in the acquisition and development of oil and gas properties.  The master-limited partnership offers a generous 7.4% yield, with a quarterly distribution of $0.725 per share.  The dividend has increased 9.75% in the past year.  LINE is a best in class upstream MLP.  Distribution growth to accelerate as it integrates acquisitions & develops high-return Granite Wash program.  LINE is positioned to capitalize on acquisition opportunities owing to low commodity price environment.  Accretion from these, which LINE “locks-in” upfront via hedging, should drive LT growth.  LINE is projected to increase EPS by 30% next year.

DCP Midstream Partners, LP (DPM) engages in gathering, compressing, treating, processing, transporting, storing, and selling natural gas in the United States.  The master-limited partnership offers a 6.31% yield, with a quarterly distribution of $0.66 per share.  The dividend has increased 5.6% in the past year.  DPM is a high growth NGL dropdown play.  Entering transformative period, as it will acquire $3b of assets from sponsor.  Dropdowns along with additional organic growth will create integrated NGL midstream platform & drive distribution growth to high-single digits.

NuStar Energy L.P. (NU) engages in the terminalling, storage, and transportation of petroleum products primarily in the United States, Canada, Mexico, the Netherlands, St. Eustatius in the Caribbean, the United Kingdom, and Turkey.  The master-limited partnership offers a generous 8.45% yield, with a quarterly distribution of $1.095 per share.  This is a deep value, turnaround story for this crude oil storage & transport MLP.  NU is sowing the seeds for a recovery in distribution growth to the low-single digits.  We believe the recent increase in organic growth capex is sustainable given the number of low cost, high return project opportunities around its assets.

Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals in the United States, Canada, and Gulf of Mexico.  The master-limited partnership offers a 4.87% yield, with a quarterly distribution of $0.635 per share.  The dividend has increased 6.28% in the past year.  EPD is the largest energy MLP with access to most prolific natural gas, NGL & crude oil plays in US.  Despite its large size, $7.6B of cap ex projects support 5-6% distribution growth per year for next several years with 80% revenues expected to be fee-based by 2013.

Plains All American Pipeline, L.P. (PAA) engages in the transportation, storage, terminalling, and marketing of crude oil, refined products, and liquid petroleum gas (LPG) products in the United States and Canada.  The master-limited partnership offers a 5.09% yield, with a quarterly distribution of $1.065 per share.  The dividend has increased 9.8% in the past year.  PAA is the largest oil transport and storage MLP with a presence in most leading oil shale plays and major storage positions at strategic oil pipeline intersections.  Approximately $5B of organic capex thru 2015 to serve expected increase in US crude production.  Its distributions should grow high single digits the next few years.

High Yield Dividend Stocks With Exploding Earnings

It’s the newest market riddle: where do you go for safety when the traditional option could be in a bubble?  With fiscal problems in Europe once again leading to sharp drops in global stock markets, many investors are seeking out stable assets that can both protect their principal and generate an income stream to keep up with inflation. Yet the most obvious choice – U.S. Treasury bonds – offer historically low yields. The benchmark 10-year Treasury yields 1.90 before taxes, well below the 2.26 percent annual rate of so-called “core” inflation, according to the U.S. Consumer Price index.  Investors should look for stocks offering high dividend yields and growing earnings.

Health Care REIT Inc.’s (HCN) first-quarter earnings jumped 81% as the senior housing and health-care focused real-estate investment trust continued its aggressive expansion.  HCN has been expanding its portfolio of assisted living and skilled-nursing facilities, including its $2.4 billion acquisition last year of Genesis Health Care. The company said it completed $753 million in investments during the latest quarter, including$426 million in medical office building investments, as well as $119 million in senior housing investments.  HCN reported a profit of $57.5 million, or 19 cents a share, up from $31.8 million, or 15 cents a share, a year earlier.

HCN has a dividend yield of 5.3% which are increased 3.5% each year.

Enterprise Products Partners L.P. (EPD) -quarter earnings jumped 49% as net income for the first quarter of 2012 was $656 million versus $435 million for the first quarter of 2011. Net income attributable to limited partners for the first quarter of 2012 was$0.73 per unit on a fully diluted basis compared to $0.49 per unit on a fully diluted basis for the first quarter of 2011.  EPD increased its cash distribution with respect to the first quarter of 2012 to$0.6275 per unit, or $2.51 per unit on an annualized basis, which represents a 5.0 percent increase from the distribution rate paid with respect to the first quarter of 2011. This is the 31st consecutive quarterly increase and the 40th increase since the partnership’s initial public offering in 1998.

EPD has a dividend yield of 5.24% which are increased 5% each year.

Canada’s biggest pipeline company TransCanada Corporation (TRP) announced comparable earnings for first quarter 2012 of $363 million or $0.52 per share. Net income attributable to common shares for first quarter 2012 was $352 million or $0.50 per share.  TRPs Board of Directors also declared a quarterly dividend of $0.44 per common share for the quarter ending June 30, 2012, equivalent to $1.76 per common share on an annualized basis.  While the 1Q earnings were not spectacular, TRP has a number of projects in process to increase future earnings,  Over the next three years, TransCanada expects to complete $13 billion of projects that are in the advanced stages of development – $7.8 billion in oil pipelines, $2.2 billion in natural gas pipelines and $3 billion in energy.

TRP has a dividend yield of 4.11% which were initiated in 2012.

7 Energy Stocks with Buy Ratings

The Energy Sector comprises companies whose businesses are dominated by either of the following activities: The construction or provision of oil rigs, drilling equipment and other energy related service and equipment, including seismic data collection. Companies engaged in the exploration, production, marketing, refining and/or transportation of oil and gas products, coal and other consumable fuels.  This screen looks at the highest yielding unit trust securities in the energy sector.  These stocks are rated 4 or 5 stars by Standard & Poor’s meaning they are classified as buys or strong buys. The latest S&P research notes are shown below.

Energy Transfer Partners LP (EPT) – After reviewing our earnings model, we lower our ’12 earnings per unit estimate to $2.64 from $3.20, reflecting the sale of its propane operations. On January 12, ETP announced that it had closed on the sale of propane operations to AmeriGas Partners, L.P. (APU 44, Hold) for approximately $2.85 billion. We view the transaction positively as it should enable ETP to focus on its natural gas liquids services. We keep our target price of $53, based on an expected yield of 6.9% on our forward distributions projection, higher than the peer average.

Regency Energy Partners LP (RGP) – After reviewing our earnings model, we keep our Q4 ’11 and full-year ’11 earnings per unit estimates of $0.24 and $0.63, respectively. We view positive RGP’s efforts to expand its natural gas liquids footprint. RGP plans to invest $630 million-$680 million in capex in ’12, vs. $373 million in ’11. We keep our ’12 earnings per unit estimate of $0.99 and initiate ’13’s at $1.01. Due to a recent rise in peer valuation multiples, we lift our target price by $2, to $29, based on our target yield of 6.6% on estimated 12-month forward distributions, higher than its peers.

Crestwood Midstream Partners LP (CMLP) – Ahead of Q4 earnings expected on February 25, we lower our Q4 earnings per unit estimate to $0.34
from $0.39 and our ’11 earnings per unit estimate to $1.10 from $1.15, based on lower gathering volumes. We maintain our ’12 earnings per unit forecast of
$1.68. CMLP declared a Q4 cash distribution of $0.49, 14% higher than a year earlier. We believe that CMLP will increase its cash distributions 8% to $2.02
in ’12. We keep our 12-month target price of $32, based on expected yield of 6.3% on our forward annualized distribution estimate, higher than the peer average.

Buckeye Partners LP (BPL) – Ahead of Q4 results scheduled for Feb 10, we maintain our Q4 earnings per unit estimate of $0.94, vs. adjusted $0.66. We keep our ’11 and ’12 earnings per unit forecasts of $3.37 and $3.75. In ’12, we expect BPL to raise its cash distribution by 4.1% to $4.24 per unit. We are encouraged by BPL’s efforts to increase waterborne refined products going into New York Harbor in order to replace volumes lost from expected refinery closures in the Northeast. We keep our target price of $75, based on a target yield of 5.6% on our forward cash distribution, below the peer average.

Kinder Morgan Energy Partners LP (KMP) – KMP posts an adjusted Q4 earnings per unit of $0.55, vs. $0.46, above our $0.51 estimate, reflecting better than expected earnings at its natural gas pipelines and CO2 pipelines segments. In ’12, we see KMP benefiting from strong growth at its products pipelines and natural gas pipelines segments. We keep our ’12 earnings per unit estimate of $2.34 and introduce our ’13 estimate of $2.51. We increase our target price to $99 from $96, based on a revised target yield of 5.0% on our estimated forward distributions, below its peer average.

Plains All American Pipeline LP (PAA) – The proposed acquisition of Canadian NGL and LPG assets from BP plc (BP 43, Hold) for $1.67B is expected
to boost PAA’s ’12 distribution payout 8%-9% ($3.98 currently). Also, PAA has entered or completed 4 other deals for a total of $620M, focused on South Texas oil. Separately, and before acquisitions, PAA sees Q4 EBITDA exceeding guidance of $410M by 10%-15%, and we lift our ’11 earnings per unit forecast $0.22 to $4.90. Based on a target yield of 5.4%, in line with peers, and a ’12 distribution growth target of 4%-5% before acquisitions, we up our target price
by $3 to $76.

Enterprise Products Partners LP (EPD) – EPD posts Q4 earnings of $0.82, vs. $0.33, above our $0.56 estimate, reflecting better than expected
results at its natural gas liquids pipeline and services segment. Q4 cash distributions rose 5.1% to $0.62 per unit. We forecast cash distributions
increasing 6.0% to $2.58 per unit this year. In ’12, we see EPD gaining from strong NGL demand. We keep our ’12 earnings per unit estimate at $2.24, and
increase our 12-month target price to $59 from $54, based on an expected yield of 4.4% on our forward distribution forecast, lower than its peer average, on
strong NGL fundamentals.

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High Yield Stocks with Very Bullish Equity Summary Scores

The list below highlights high yield dividend stocks with a very bullish equity summary score between 9.1 to 10.  These stocks are also rated a buy or hold by S&P stock ratings.  The following is a summary of most recent research notes for the top stocks from this list.

Telecom Italia SpA (TI) – Q3 revenues were up 3.7% and EBITDA was up 0.8%, stronger than we  expected. Results improved at the Italian domestic operations where the  pace of decline eased, with revenues down 2.8% and EBITDA down 2.5%, vs.  respective Q2 declines of 5.1% and 4.8%. While we expect revenues in  Italy to fall about 2.5% in ’12, we expect operations in Brazil and  Argentina to continue to perform well. To reflect the weakening of the  Euro vs. the U.S. dollar, we lower our operating earnings per ADS  estimates $0.16 to $1.40 for ’11 and by $0.30 to $1.40 for ’12. Our  target price remains $13.
AstraZeneca PLC  (AZN) – Q3 earnings per ADS of $1.70, vs. $1.50, surpassed our $1.46 estimate.  We attribute the beat to higher than expected sales, and reductions in  interest expense and taxes. A $5B share buyback also lowered the share  count. In view of the strong Q3, we raise our ’11 ADS profit forecast to  $7.30 from $7.12. While Q4 Crestor sales are likely to be hurt by  generic Lipitor and slowing trends in Brazil, we think long-term  prospects remain favorable, aided by an expanding new drug portfolio. We  raise our target price by $2 to $52, based on revised DCF and forward  P/E assumptions.
Total SA (TOT) – We think TOT has performed well, despite flat Q3 production on a slow  ramp of new projects. TOT merged Refining/Chemicals and plans to trim  European refining. It is negotiating with labor unions to restructure  downstream in ’12. Production growth target is 2.5% in ’11, on its 12%  acquisition of Novatek. We see new volumes from Nigeria and Angola and  more aggressive exploration. We believe pending Shtokman deal will pass  when Russia implements a more competitive fiscal regime. We lift our ’11  GAAP EPS estimate $0.40 to $8.25 and ’12’s by $0.80 to $8.70. Dividend  yields 5.65%.
Plains All American Pipeline LP  (PAA) – The proposed acquisition of Canadian NGL and LPG assets from BP plc (BP  43, Hold) for $1.67B is expected to boost PAA’s ’12 distribution payout  8%-9% ($3.98 currently). Also, PAA has entered or completed 4 other  deals for a total of $620M, focused on South Texas oil. Separately, and  before acquisitions, PAA sees Q4 EBITDA exceeding guidance of $410M by  10%-15%, and we lift our ’11 earnings per unit forecast $0.22 to $4.90.  Based on a target yield of 5.4%, in line with peers, and a ’12  distribution growth target of 4%-5% before acquisitions, we up our  target price by $3 to $76.
Vodafone Group PLC (VOD) – Recent results have shown improving trends in VOD’s emerging market  growth engines India and South Africa and signs of a turnaround in its  more mature European business. We believe revenue momentum and good cost  control will enable VOD to beat its EBIT guidance for FY 12 (Mar). As we  roll forward our DCF analysis, we are raising our 12-month target price  on the ADSs by $2 to $34. Combined with an above-average dividend yield  that we see as well supported by cash flow, we view VOD as compelling.

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The Best Dividend Stocks for 2012 – Energy Sector

S&P recommends marketweighting the S&P 500 Energy sector. Year to date through November 18, the S&P Energy Index, which represented 12.4% of the S&P 500 Index, was down 0.1%, compared to a 3.3% decline for the S&P 500. In 2010, this sector index advanced 17.9%, versus a 12.8% increase for the 500. There are seven sub-industry indices in this sector, with Integrated Oil & Gas by far the largest at 56.7% of the sector’s market value.

S&P equity analysts have a positive fundamental outlook on the influential Integrated Oil & Gas sub-industry, as well as most of the sector’s other smaller sub-industry groups due to strong emerging market energy demand and tight global capacity. However, we believe that while oil prices will remain historically elevated, averaging $92.35/bbl. in 2011 and $95.53/bbl. in 2012, energy price appreciation will slow relative to 2010’s big advance owing to uncertain U.S. and European growth prospects. According to Capital IQ, the sector’s recent valuation of 9.8X consensus estimated 2012 EPS is below the 500’s P/E of 11.3X, as oil price volatility keeps investors from assigning the sector too high a valuation, in our view. The sector’s P/E-to-projected-five-year EPS growth rate (PEG) ratio of 0.8X is below the broader market’s 1.0X. This sector’s marketweighted S&P STARS average of 4.3 (out of 5.0) is above the S&P 500’s average of 3.8.

The S&P GICS Energy Index has broken out from a bullish, inverse head-and-shoulders pattern. This suggests to us that the intermediate-term trend has turned bullish. However, prices have stalled up at the next area of formidable overhead supply in the 530 to 560 region. Prices have rallied back above their 17-week and 43-week exponential moving averages, a bullish sign, in our view. The 17-week has been rising since mid-October and is very close to retaking the 43-week exponential. A bullish crossover would be more confirmation that the longer-term trend is bullish. Relative strength vs. the 500 remains in a downtrend off the early April top; however, the RS line has rebounded nicely since the end of September, and is not far from breaking its downtrend. We have raised our technical opinion on the Energy sector to neutral with a bullish bias, from neutral with a bearish bias.

In all, we recommend marketweighting the Energy sector based on our view that more subdued oil price appreciation offsets low valuations.

Some of the notable energy companies making the list are well known such as COP and CVX.  However, other energy companies offer high yield dividends such as LUKOY (7.4%), PSE (7.8%), REPYY (7.8%), YPF (10%) and ERF (8.9%).

OAO Lukoil (LUKOY), together with its subsidiaries, engages in the exploration, production, refining, marketing, and distribution of oil and gas in Russia and internationally.  EPS increased from $10.93 to an estimated $13.71 over the past 5 quarters indicating an improving growth rate. Analyst forecasts have recently been raised.  Lukoil Oil Company’s stock price is down 11.1% in the last 12 months, down 10.7% in the past quarter and down 10.3% in the past month This historical performance should lead to above average price performance in the next year.

The passing of 2010 marked a series of changes for Enerplus (ERF), as it converted from an income trust to a corporation. The company sold off conventional and oil sands assets, using the proceeds to build its acreage position in Pennsylvania’s Marcellus Shale and the Bakken in North Dakota and Saskatchewan.  We think the company will continue to pay an attractive dividend and aggressively pursue production growth in the Marcellus and Bakken.  ERFs development efforts in the Marcellus Shale should lead to strong production growth through 2015.

Here is a list of dividend payers in the energy sector ranked as very bullish or bullish by equity summary score worth a look for 2012.

Best Dividend Stocks for 2012 - Energy Sector

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