At a time when Treasury yields have been nonexistent, MLP investors have been able to get high payouts that are viewed as quasi-dividends, due to some payouts representing income and some representing return of capital. The question to ask now is whether the risk-reward is there for new investors at the current prices. The unit prices of many key MLPs have been hit hard along with stocks in the past few weeks, and we wanted to take a risk-reward look for summer 2012. This sector could get a recovery, or it could face additional pressure like we saw in 2011.

If investors have been involved in the MLP sector since before, during or right after the great panic selling of 2008 and 2009, they are up huge if they held on. In many cases they have doubled their money or more. And as far as they are concerned they have been getting 5% to 8% in payouts each year (again, some income and some return of capital). The problem is that the prices here have become choppy and the MLP structures often have had secondary offerings on top of secondary offerings. Those secondary offerings have provided growth and acquisition capital, but some investors have started to worry that these secondary offerings may be the biggest contribution to the never-ending payout increases that have been seen in this sector.

MLPs in the energy space often attract the same sort of investors who would buy utility shares and preferred shares of banks, but they also overlap with REIT investors who look for above-market yields. This sector has enjoyed large price gains in the unit (share) prices, and investors are looking for any safe investments that have high payouts, compared to the world of no-returns in CDs and Treasuries. A wave of secondary offerings from many MLPs came before and during the recent market sell-off.

24/7 Wall St. has evaluated some of the top MLP investments to see how much implied upside remains in this sector. We have taken price performance as far as the sell-off from recent highs, as well as issues like the payout ratios (implied yield-equivalent) and the consensus price targets from Thomson Reuters. We have evaluated the following MLPs: Enterprise Products Partners LP (NYSE: EPD), Kinder Morgan Energy Partners LP (NYSE: KMP), Plains All American Pipeline LP (NYSE: PAA), ONEOK Partners LP (NYSE: OKS), Energy Transfer Partners LP (NYSE: ETP) and Enbridge Energy Partners LP (NYSE: EEP). These MLPs mentioned and covered here are some of the ones we track and keep on our watch list in the sector. These have market caps above $8 billion, they have a history of increased payouts each quarter, for the most part, and generally speaking these MLPs are all believed to have good management teams.

Investors have made a bundle here in this sector. MLPs are not really all that correlated to the price of oil because these are the partnerships (general and limited) for pipelines, terminals, and other facilities involved in the oil and gas sector in America. MLPs must derive 90% of their income from real estate, natural resources and commodities. The issuing of K-1 statements can make the structure more complicated, but the payouts often make that worth it for many investors seeking higher streams of cash flow.

We also have evaluated some of the key ETFs and closed-end funds in this sector. Be advise that just the three vehicles we have tracked in funds and ETFs have a combined market value of more than $11 billion.

The original capacity of the pipeline will be 150,000 barrels/day, with expansion planned to exceed 400,000 barrels/day by the first part of next year. If a “loop” or second, parallel pipeline is added, the total capacity of Seaway will reach 850,000 barrels/day by 2014. The Seaway pipeline is one of several proposed crude oil pipelines that would carry crude from North Dakota, Montana, and Alberta to the US Gulf Coast, where crude prices are higher.

Transcanada Corp. (NYSE: TRP) has filed a new proposal for its Keystone XL pipeline, while Oneok Inc. (NYSE: OKE) and Oneok Partners LP (NYSE: OKS) have proposed a 1,300 mile route from North Dakota to Cushing, while Enbridge Energy Partners LP (NYSE: EEP) and parent Enbridge are proposing new and reversed pipelines to move crude to Cushing.

Crude from the Bakken oil play and the Canadian oil sands sells at a steep discount to Brent crude, which sets the price benchmark on the Gulf Coast. Producers hope to boost the price they get for their crude if they can just get the black stuff to more liquid market. For consumers, closing the price differential will very likely mean higher prices.

Paul Ausick

AAR Corporation (NYSE: AIR) named Bear of the Day at Zacks.

The Allstate Corporation (NYSE: ALL) Raised to Overweight at Barclays.

Enterprise Products Partners. LP (NYSE: EPD) Started as Outperform at Credit Suisse.

FedEx Corporation (NYSE: FDX) Raised to Strong Buy at Raymond James.

First Solar Inc. (NASDAQ: FSLR) maintain HOLD with $20 target at Canaccord Genuity.

Honeywell International (NYSE: HON) named Bull of the Day at Zacks.

JDS Uniphase Corporation (NASDAQ: JDSU) Reiterated Buy with $17 target at Argus.

LinkedIn Corporation (NYSE: LNKD) target raised to $140 at Susquehanna.

Progressive Waste Solutions Ltd. (NYSE: BIN) Cut to Neutral with $23 target at Credit Suisse.

Red Hat, Inc. (NYSE: RHT) Started as Outperform at BMO.

Saks Inc. (NYSE: SKS) Reiterated Buy and $14 target at Argus.

Spreadtrum Communications (NASDAQ: SPRD) Reiterated Buy and raised target to $21 at Canaccord Genuity.

SunPower Corporation (NASDAQ: SPWR) Raised to Hold at ThinkEquity.

Swift Energy Company (NYSE: SFY) Reiterated Buy but cut target to $40 at Canaccord Genuity.

True Religion Apparel, Inc. (NASDAQ: TRLG) named value stock of the day at Zacks.

ValueClick, Inc. (NASDAQ: VCLK) Raised to Buy at S&P Capital IQ (late-Thursday call).

Whole Foods Markets, Inc. (NASDAQ: WFM) Raised to Overweight at JPMorgan.

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JON C. OGG

Tim Cook, Apple’s CEO, is in China to address production labor problems. (Reuters)

The European Union begins an investigation of the United Technologies (NYSE: UTX) bid for Goodrich (NYSE: GR). (Reuters)

Fed Chairman Bernanke says “easy money” remains necessary because of the slow jobs recovery. (WSJ)

Houston-based Enterprise Products Partners (NYSE: EPD) and Enbridge (NYSE: ENB) of Calgary plan to create a pipeline that will compete with the Keystone XL. (WSJ)

German consumer confidence slips in a recent poll by GfK. (WSJ)

Nokia (NYSE: NOK) will sell its new high-end Lumia 900 smartphone for $99.99 in the U.S. (WSJ)

Chancellor Merkel says she supports a temporary increase in European bailout funds. (WSJ)

The Federal Trade Commission will ask Congress to examine new digital privacy rules. (WSJ)

AstraZeneca (NYSE: AZN) cannot delay the distribution of generic versions of its antipsychotic drug Seroquel. (WSJ)

Banks that did poorly in recent stress tests performed by the Fed want data used to make the decisions. (WSJ)

Some states may run pension plans for companies. (NYT)

BWM recalls 1.3 million cars due to battery flaws. (NYT)

Goldman Sachs (NYSE: GS) plans to enter the electronic bond trading industry. (FT)

Google (NASDAQ: GOOG) inches closer to the release of a self-driving car. (Bloomberg)

Douglas A. McIntyre

Two major energy companies are planning to build new pipelines that will move as much as 850,000 barrels of crude oil a day from Canada to refineries along the Gulf Coast by mid-2014, in the latest effort to cope with a surge of oil production in North America.

The separate projects, planned by Houston-based Enterprise Products Partners (NYSE: EPD) and Enbridge (NYSE: ENB) of Calgary, will compete with TransCanada’s (NYSE: TRP) proposed Keystone XL pipeline, a massive project to move crude from the oil sands of Alberta to U.S. refineries.

What is not clear is how the new enterprise plans to get over the environmental objections to Keystone. The Obama Administration has blocked the construction of the northern leg of the pipeline, despite persuasive arguments that the project could push down oil prices and add tens of thousands of jobs to the U.S. economy. The answer appears to be that the new, rival pipeline will be made up of sections already approved by federal and state authorities. That may not stop environmentalists from objections that a new flow of oil will endanger regions through which the pipeline carries crude.

The Journal points out that the new pipeline does not negate the need for one that moves crude from some regions in Canada.

Douglas A. McIntyre

Acorda Therapeutics, Inc. (NASDAQ: ACOR) Cut to Neutral at Citigroup.
Arcelor Mittal (NYSE: MT) named as Bear of the Day at Zacks.
Bed Bath & Beyond Inc. (NASDAQ: BBBY) Reiterated Buy with $70 target at Argus.
Chesapeake Energy Corporation (NYSE: CHK) Raised to Buy at Stifel Nicolaus.
Cliffs Natural Resources Inc. (NYSE: CLF) Cut to Buy from Strong Buy at S&P Capital IQ.
Comcast Corporation (NASDAQ: CMCSA) Cut to Hold at Argus.
Dell Inc. (NASDAQ: DELL) Cut to Neutral at Baird.
Eastman Chemical Co. (NYSE: EMN) named as Bull of the Day at Zacks.
Enterprise Products Partners LP (NYSE: EPD) Reiterated Buy and target set at $61 by Argus.
Leap Wireless International (NASDAQ: LEAP) Cut to Neutral at Collins Stewart.
Petroleo Brasileiro S.A. (NYSE: PBR), or Petrobras, Cut to Equalweight at Barclays.
Polo Ralph Lauren Corporation (NYSE: RL) Raised to Buy with $202 target at Argus.
Valero Energy Corporation (NYSE: VLO) Cut to Neutral at UBS.
Wynn Resorts Ltd. (NASDAQ: WYNN) Reiterated Outperform with $145 target at Credit Suisse.
Zynga, Inc. (NASDAQ: ZNGA) named as Aggressive Growth stock of the day at Zacks.

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The unofficial closing bells put the DJIA up more than 83 points to 12,716.31 (0.66%), the NASDAQ rose more than 34 points (1.22%) to 2,848.27, and the S&P 500 rose 0.89% or nearly 12 points to 1,324.08.

There were several analyst upgrades and downgrades today, including Citigroup Inc. (NYSE: C) raised to ‘outperform’ at Wells Fargo; Newmont Mining Corp. (NYSE: NEM) cut to ‘hold’ at Stifel Nicolaus; Seagate Technology PLC (NASDAQ: STX) raised to ‘buy’ at Stifel Nicolaus; Exxon Mobil Corp. (NYSE: XOM) cut to ‘hold’ at Argus (see our coverage here); and Monster Worldwide Inc. (NYSE: MWW) cut to ‘perform at Oppenheimer. Amazon.com (NASDAQ: AMZN) had three ratings changes today: maintained as ‘neutral’ with target price cut to $190 at Credit Suisse; maintained ‘outperform’ but estimates cut at Baird; and target price lowered to $225 at Jefferies.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Amazon.com is down -8.2% at $178.51; Broadcom Corp. (NASDAQ: BRCM) is up 8.24% at $37.18; Aetna Inc. (NYSE: AET) is up 3.3% at $45.13; Corinthian Colleges Inc. (NASDAQ: COCO) is up nearly 34% at $4.05; Enterprise Products Partners L.P. (NYSE: EPD) is up 3.8% at $50.13, after posting a new 52-week high of $50.35 earlier today; Manpower Inc. (NYSE: MAN) is up nearly 14% at $45.70; Marathon Petroleum Corp. (NYSE: MPC) is up nearly 10% at $41.98; Northrup Grumman Corp. (NYSE: NOC) is up 2.22% at $59.34; and Whirlpool Corp. (NYSE: WHR) is up 14% at $61.93.

Other standouts from today include the following stocks:

Key Tronic Corp. (NASDAQ: KTCC) is up nearly 37% at $8.53, after posting a new 52-week high of $8.74 earlier today. The computer peripherals maker posted better-than-expected earnings and revenues after markets closed last night.

Sangamo BioSciences Inc. (NASDAQ: SGMO) is up more than 21% at $4.19. The pharmaceutical maker has announced a collaboration with Shire plc (NASDAQ: SHPGY) to develop a hemophilia treatment.

Medivation Inc. (NASDAQ: MDVN) is up more than 21% at $67.26, after posting a new 52-week high of $70.87 earlier today. The development stage drug maker has reported highly positive results on a test of its late-stage prostate cancer treatment. We have more coverage here.

JDA Software Group Inc. (NASDAQ: JDAS) is down more than -17% at $24.39. The software maker issued a fairly weak quarterly report and continuing investor wariness remains over an SEC investigation of the company’s accounting practices.

IXYS Corp. (NASDAQ: IXYS) is down more than 14% at $11.76. The integrated circuit maker posted poor quarterly numbers after markets closed last night.

Stay tuned for Thursday. Federal Reserve chairman Ben Bernanke is speaking at 10:00 a.m. and Dallas Fed president Richard Fisher is speaking in the evening. We have noted the following events on the schedule (all times Eastern):

• 7:30 a.m. – Challenger Job-cut data
• 8:30 a.m. – New claims for unemployment benefits
• 10:30 a.m. – EIA weekly natural gas storage report
• 4:30 p.m. – Federal Reserve money supply and balance sheet reports

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Paul Ausick

It turns out that many stocks with high dividend yields are now more attractive than sovereign debt in the U.S. and abroad. Part of the allure, besides income or reinvestment, is that dividend stocks often hold up better than other investments during jittery markets. It is hard to imagine, but the high-yield utility sector was one of the top performers of the S&P in 2011. In some cases, half of an investor’s total return through time may come from dividends. Warren Buffett generally picks dividend-paying companies for Berkshire Hathaway Inc. (NYSE: BRK-A) after following some of the principles of Benjamin Graham.

The 24/7 Wall St. 2012 Model Dividend Portfolio includes the following stocks: American Electric Power Co., Inc. (NYSE: AEP); American Water Works Company, Inc. (NYSE: AWK); AT&T, Inc. (NYSE: T); General Electric Co. (NYSE: GE); Government Properties Income Trust (NYSE: GOV); Kimberly-Clark Corporation (NYSE: KMB); Senior Housing Properties Trust (NYSE: SNH); and Wal-Mart Stores Inc. (NYSE: WMT).

While exchange-traded products have been avoided in the past, recent trends merit a look at the open-end or closed-end mutual funds and ETF products as follows: SPDR Barclays Capital High Yield Bond (NYSE: JNK); JPMorgan Alerian MLP Index ETN (NYSE: AMJ); ALPS Alerian MLP ETF (NYSE: AMLP); and PowerShares Financial Preferred (NYSE: PGF).

Lastly, there have been some exits due to upside price performance: Altria Group Inc. (NYSE: MO); Digital Realty Trust Inc. (NYSE: DLR); Enterprise Products Partners LP (NYSE: EPD); and Kinder Morgan Energy Partners LP (NYSE: KMP).

We have described the features and outlook for each component of our Model Dividend Portfolio.

The new gathering system will serve the Keathley Canyon area and serve producers Anadarko Petroleum Co. (NYSE: APC), Apache Corp. (NYSE: APA), Exxon Mobil Corp. (NYSE: XOM), Eni SpA (NYSE: E), Petroleo Brasileiro (NYSE: PBR), and Plains Exploration & Production Co. (NYSE: PXP). Keathley Canyon was the site of the first major oil discovery in the US Gulf once drilling was reopened following the Macondo well explosion in April 2010 that killed 11 workers on a rig operated by BP plc (NYSE: BP). Exxon, which made the discovery, has estimated the resource at 700 million barrels.

The joint venture, called the Southeast Keathley Canyon Pipeline Co. LLC (SEKCO), plans to build an 18-inch pipeline to transport 115,000 barrels/day of crude to a floating production platform and connect to Enterprise’s Poseidon pipeline system to move the oil onshore. The southeast portion of Keathley Canyon is estimated to hold about 300 million barrels of reserves.

In related transactions, Genesis is acquiring a 28% stake in the Poseidon pipeline system from Marathon Oil Corp. (NYSE: MRO), as well as a 29% stake in the Odyssey pipeline system which is majority owned and operated by Royal Dutch Shell plc (NYSE: RDS-A) and a 23% stake in the Eugene Island pipeline system owned by a group including Exxon, Shell, Chevron Corp. (NYSE: CVX), and ConocoPhillips (NYSE: COP). Genesis is paying about $206 million for these three acquisitions, which includes about $26 million for the value of the crude already in the pipelines. The company used its revolving credit facility to finance the purchases.

The SEKCO pipeline system is expected to be in service by mid-2014.

Paul Ausick

The projected proceeds of the sale are put at about $825.1 million, which comes to roughly $36.24 per unit.  The most recent price was $39.80 and the 52-week range is $30.78 to $47.34.  Enterprise noted that the proceeds will be used for general partnership purposes, including funding growth capital projects and that the sale should close in January 2012.

Enterprise Products Partners L.P. is already massive with a $39 billion market capitalization, while Energy Transfer Equity has a market value of about $8.9 billion.  Enterprise units trade at $45.52 and the consensus analyst price target objective from Thomson Reuters is $49.11.  Energy Transfer Equity trades at $39.80 and the consensus price target objective.

This matters for “dividend investors” even though these MLP payouts are referred to as distributions of both income and a return of capital component.  We just recently gave an MLP sector outlook for 2012 for the 24/7 Wall St. 2012 Model Dividend Portfolio.

JPMorgan Alerian MLP Index ETN (NYSE: AMJ) and ALPS Alerian MLP ETF (NYSE: AMLP) both include these and many other key ETFs, and Kayne Anderson MLP Investment Company (NYSE: KYN) lists both of these MLPs in the top ten holdings with Enterprise representing 9.1% and Energy Transfer representing 4.2%.

What Enterprise did not say is that the proceeds are likely to allow the MLP to keep boosting payouts ahead.  It is quarter after quarter that these MLPs keep hiking their quarterly payouts, and that is true for Enterprise as well.

JON C. OGG