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This New Monthly Dividend Payer is an Undervalued Growth and Income Play

Vanguard Natural Resources, LLC (NYSE: VNR) is a publicly traded limited liability company focused on the acquisition, production and development of oil and natural gas properties. Vanguard has significant growth and income potential while also being undervalued at its current stock price.

Vanguard trades at a PE of 7.4 compared to an industry PE average of 14. The Company increased earnings 88% and revenues 35% last quarter compared to the same quarter one year earlier.  Vanguard is projected to grow EPS by 36% next year.  Vanguard has increased cash flow 33% in the last 5 years compared to 12% for the industry.

Vanguard reported consolidated earnings and operations results for the second quarter and six months ended June 30, 2012.  For the quarter, the company reported total revenues of $151,915,000 against $112,509,000 a year ago. Income from operations was $102,301,000 against $61,088,000 a year ago. Net income attributable to the company unit holders was $103,447,000 against $31,799,000 a year ago.

Vanguard announced a public offering of an additional $200 million aggregate principal amount of their 7.875% senior unsecured notes due 2020 at a public offering price of 7.875%. The Company intends to use the net proceeds from this offering to repay a portion of the outstanding borrowings under its senior secured reserve-based credit facility.

Vanguard converted its quarterly dividend to a monthly dividend in July 2012.  The Company is paying 40.20 per month for an annual dividend of $2.40.  This is a current dividend yield of 8.04%.  The Company increased its quarterly dividend 7 straight quarters before converting to a monthly payout.  Vanguard has a 57% dividend payout ratio.

Richard Robert, EVP & CFO, commented, “We have listened to investors and we believe that we are giving them what they want. A monthly distribution should allow investors to better manage their finances by matching their monthly cash outflows with monthly cash inflows. In addition, a monthly distribution will allow us to reward our investors in a timelier manner as we make accretive acquisitions in the future. We believe the decision to pay distributions monthly rather than quarterly will be welcomed by both our current Vanguard unit holders as well as other potential investors looking to invest in high yielding energy securities.”

First Call analysts have a BUY recommendation with a 1.8 stock rating.  The stock has an equity summary score of 7.2 out of 10 for a Bullish outlook.  Vanguard has a 12 month price target of 33.

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