The stock market will likely remain under pressure as the Fed continues to increase interest rates to battle the high inflation, raising investors’ worries about a possible recession. Moreover, the Fed signaled that another big interest rate hike is likely later this month despite the risk of slowing economic growth. The CBOE Volatility Index has gained 54.8% year-to-date.
Furthermore, Timothy Braude, global head of OCIO at Goldman Sachs Asset Management, said, “We don’t expect the choppiness and volatility we’ve seen over the first half of the year to subside.”
Master Limited Partnership (MLP) stocks generally possess stable cash inflows and are known for generating steady investment returns. Investors’ interest in the MLPs is evident from the Global X MLP ETF’s (MLPA) 2.6% year-to-date returns against the broader market pullback.
Thus, fundamentally strong MLP stocks Western Midstream Partners, LP (WES), CVR Partners, LP (UAN), and USD Partners LP (USDP), which are yielding more than 8%, could be solid investments now to navigate the market fluctuations. These stocks are Buy-rated in our POWR Ratings system.
Western Midstream Partners, LP (WES)
Midstream energy company WES and its subsidiaries acquire, own, develop, and operate primarily in the United States. The company manages assets in Texas, New Mexico, the Rocky Mountains, and North-central Pennsylvania.
On May 10, 2022, Craig Collins, Senior Vice President and Chief Operating Officer, said, “We continue to attract incremental volumes from Occidental and third parties due to our superior position in the Delaware Basin, improved cost structure, and commitment to customer service.”
WES has paid dividends for nine straight years. While WES’ four-year average dividend yield is 11.11%, its current dividend translates to an 8.37% yield.
WES’ total revenues came in at $758.30 million for the first quarter ended March 31, 2022, up 12.3% year-over-year. Its net income came in at $308.72 million, up 66.2% year-over-year, while its EPS came in at $0.75, up 70.5% year-over-year. Also, its adjusted EBITDA came in at $539.05 million, up 12.1% year-over-year.
Analysts expect WES’ revenue to increase 14% year-over-year to $3.28 billion in 2022. Its EPS is estimated to grow 42.7% year-over-year to $3.11 in 2022. Over the past year, the stock has gained 9% to close the last trading session at $23.56.
WES’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
WES has an A grade for Quality and a B for Momentum, Stability, and Sentiment. Within the A-rated MLPs - Oil & Gas industry, it is ranked #2 out of 34 stocks. Click here for the additional POWR Ratings for Growth and Value for WES.
CVR Partners, LP (UAN)
UAN and its subsidiaries engage in the production and sale of nitrogen fertilizer products in the United States. The company offers ammonia products and urea and ammonium nitrate products.
On May 2, 2022, Mark Pytosh, UAN’s CEO, said, “We are pleased to have returned $3.43 per common unit to our unitholders through $12.4 million of unit repurchases and a declared cash distribution of $2.26 per common unit for the 2022 first quarter.”
Over the last three years, UAN’s dividend payouts have grown at an 85.6% CAGR. While UAN’s four-year average dividend yield is 6.63%, its current dividend translates to a 9.85% yield.
UAN’s net sales came in at $222.87 million, up 265.8% year-over-year, for the first quarter ended March 31, 2022. Its net income came in at $93.66 million, compared to a loss of $25.38 million in the year-ago period. Moreover, its EPS came in at $8.78, compared to a loss per share of $2.37 in the prior-year period. The company’s EBITDA came in at $123.42 million, up 2,540.6% year-over-year.
UAN’s EPS is expected to grow 8% per annum for the next five years. Over the past year, the stock has gained 37.4% to close the last trading session at $87.08.
UAN has an overall A rating, equating to a Strong Buy in our POWR Ratings system. Also, the stock has an A grade for Growth and Quality and a B grade for Value.
Within the A-rated MLPs - Other industry, it is ranked #3 out of 12 stocks. Click here for the additional POWR Ratings for Momentum, Stability, and Sentiment for UAN.
USD Partners LP (USDP)
USDP acquires, develops, and operates midstream infrastructure assets and logistics solutions for crude oil, biofuels, and other energy-related products in the United States and Canada. The company operates through two segments- Terminalling Services and Fleet Services.
On April 6, 2022, USDP announced the completion of its acquisition of the Hardisty South terminal assets from USD Group LLC. This acquisition is expected to enhance USDP’s business expansion.
USDP has paid dividends for seven consecutive years. While USDP’s four-year average dividend yield is 15.83%, its current dividend translates to a 9.34% yield.
For the first quarter ended March 31, 2022, USDP’s terminalling services revenues increased marginally year-over-year to $28.18 million. Its net income came in at $8.99 million, up 22.7% year-over-year. In addition, its cash and cash equivalents came in at $11.93 million, compared to $11.02 million in the previous period.
USDP’s revenue is expected to come in at $167.27 million in 2023, representing a 22.5% year-over-year rise. The company’s EPS is expected to increase 60% year-over-year to $1.20 in 2023. USDP has lost 3% year-to-date to close the last trading session at $5.13.
It’s no surprise that USDP has an overall B rating, equating to a Buy in our proprietary rating system. In addition, it has an A grade for Sentiment and a B for Momentum and Quality.
USDP is ranked #5 out of 12 stocks in the MLPs - Other industry. Click here to see the additional POWR Ratings for USDP (Growth, Value, and Stability).
WES shares were trading at $25.12 per share on Thursday afternoon, up $1.56 (+6.62%). Year-to-date, WES has gained 16.69%, versus a -17.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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