Despite a sell-off earlier in the year, the top energy master limited partnerships (MLPs) finished up the first half of the year in pretty good shape. In fact, on a total return basis, which is increase in price plus distributions, the Alerian MLP index has outperformed the S&P 500 by a 15.2% to 6.1% basis. With continued firm energy pricing and demand, and a slow grind higher in interest rates, there could be good opportunities for investors for the second half of 2014.
A new research report from RBC point outs that hawkish commentary from the Federal Reserve has tapped the brakes on MLPs to start the third quarter. While acknowledging that the super easy policy is starting to wind down, the RBC team continues to view the fundamental backdrop as highly attractive for investment.
We screened their top stocks rated Outperform for those with the highest distributions. Remember, that MLP distributions can contain return of principal.
Atlas Resource Partners L.P. (NYSE: ARP) is a high-yielding name with outstanding growth potential. RBC analysts are anxious for the company’s update on the partnership drilling capital program amount to be raised in 2015. Atlas is an exploration and production MLP that owns an interest in more than 13,000 producing natural gas and oil wells, and it is also the largest sponsor of natural gas and oil investment partnerships in the United States. Investors are paid a giant 11.5% distribution. The RBC price target is $26. The Thomson/First Call consensus target is $23. Shares closed trading Monday at $20.02.
Breitburn Energy Partners L.P. (NASDAQ: BBEP) is known for the industry’s most accretive acquisitions, which means that each deal generates above-average returns. In fact, the company posted $2.1 billion worth of deals from 2011 to 2013. The RBC analysts are looking forward to a company update in regards to the $600 million acquisition target for 2014. Investors are paid an outstanding 9.1% distribution. The RBC price target is $22, while the consensus is at $22.77. Breitburn closed Monday at $21.97.