Dear Mr. Berko: For many reasons, I think oil and gas is going to move up later this year and in 2017. We have $60,000 in our joint account to speculate with. We want to buy a portfolio of seven or eight oil and gas stocks that will yield at least a 9 percent dividend. We know this is speculative, but we think there’s a better chance of success if you pick the stocks versus our picking them. We can afford the risks, and we won’t hold you responsible if they don’t do well. — TR, Buffalo, N.Y.
Dear TR: I only recommend these rank speculations to investors who can complete six of the following eight personal requirements. You must be able to gargle with battery acid, leap over tall buildings, chew Coke bottle glass, do pushups on a bed of nails, travel faster than a speeding bullet, digest a Carolina Reaper, have open-heart surgery without anesthesia and place among the top five contestants in the Illinois State Fair hog calling contest. If you can do six of those, then the following picks were chosen just for you by Nigerian President Muhammadu Buhari, Venezuelan President Nicolas Maduro, Brazilian President Dilma Rousseff and Goldman Sachs.
BP PLC (BP-$34), a $211 billion-revenue integrated oil and gas company across the pond, provides its gas stations with fuel, gives businesses and homes energy for heat and light, and makes lubricants and petrochemicals used to make thousands of everyday plastic items. BP should earn $1.23 a share this year, and in 2017, with revenues of $255 billion, earnings could come in at $2.70 a share. The $2.40 dividend yields 7.3 percent and is sustainable, considering BP’s impressive cash flow.
Royal Dutch Shell (RDS-B-$53), a $250 billion integrated oil and gas company, has a mailing address in the Netherlands. It operates much the same as BP. Its $3.76 dividend, yielding 9.1 percent, is sustainable, considering expected 2017 revenues of $335 billion and a strong free cash flow.
EnLink Midstream Partners (ENLK-$17.50), a $4.5 billion master limited partnership, provides midstream energy services — gathering, transmission, processing, fractionation and marketing to natural gas producers. The $1.56 distribution yields 9.2 percent. ENLK’s high-quality customer base augurs well for better revenues of $4.6 billion in 2017, and the distribution is stable.
Oneok Partners (OKS-$41.50) has raised its distribution yearly since 2005. OKS is a $9 billion-revenue MLP that gathers, processes, stores and transports natural gas, and it should earn $2.35 a share this year. OKS expects revenues of $10.2 billion next year and earnings of $2.50 a share. This year’s $3.22 distribution yields 7.9 percent, and management expects to raise the distribution in 2017 to $3.34.
DCP Midstream Partners (DPM-$35) is a $1.8 billion-revenue MLP that owns a portfolio of midstream energy assets and has increased its distribution each year since 2006. This year’s distribution of $3.12 yields 9.1 percent. With expected 2017 revenues of $2.2 billion, the distribution should be increased to $3.20.
Martin Midstream Partners (MMLP-$21) is an $896 million-revenue MLP that transports, stores and markets petroleum products and byproducts via 30 shore-based terminal facilities. From 16 specialty terminals, MMLP refines, blends and packages products for producers and suppliers of petroleum byproducts. Revenues for 2017 are expected to exceed $1 billion, and the current $3.25 distribution, yielding 15.6 percent, should be maintained.
Enbridge Energy Partners (EEP-$25) will report $4.3 billion in 2016 revenues, and its $2.33 distribution yields 9.48 percent. EEP owns and operates a diversified portfolio of crude oil and natural gas transportation systems. Next year, with projected revenues of $4.6 billion, EEP may increase the distribution to $2.41.
Finally, Energy Transfer Partners (ETP-$41.38) is a midstream and interstate transportation and storage company with more than 60,000 miles of pipeline. Impressive earnings are expected in 2017, and the $4.22 dividend yields 9.9 percent.
This eight-issue portfolio requires that you invest $7,000 in each and yields 8.9 percent. Each issue has significant free cash flow, and some will increase their dividends this year and next. If the above companies continue to improve efficiencies and if oil remains in today’s narrow range, each of the above companies could also see a higher stock price.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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