4 Energy Stocks With Huge Yields May Be the Best Sector Play Now
PermRock Royalty Trust
This company recently had an initial public offering and is a great bet for investors looking for Permian Basin energy exposure. PermRock Royalty Trust (NYSE: PRT) was formed to own a perpetual interest in oil and gas producing properties. The company was established in 2017 through a trust agreement between Boaz Energy II and Simmons Bank.
Pursuant to the indenture, Boaz Energy conveyed to the trust an 80% net profits interest carved out of a subset of Boaz Energy’s oil and gas leasehold and royalty interest in the Permian Basin of West Texas. This net profits interest is the principal asset of the trust.
Owning PermRock Royalty’s units gives investors direct exposure to the Permian Basin with a monthly distribution and a 1099 status for taxes but without the risk of dilution to unitholders, additional leverage and acquisition of additional acreage. Boaz Energy’s interests are directly aligned with unitholders through a retention of 5.9 million units and a 20% direct interest in net profits of the underlying properties.
Investors in PermRock Royalty are paid a giant 12.53% distribution monthly. Numerous firms recently started coverage of the shares with a Buy rating. UBS was one, and it has a $21 price target. No consensus target was currently available. The shares closed most recently at $15.89 apiece.
This company has hit our insider buying screens numerous times over the past two years. Summit Midstream Partners L.P. (NYSE: SMLP) focuses on owning, developing and operating midstream energy infrastructure assets primarily shale formations, in North America. The company provides natural gas gathering, treating and processing services pursuant to primarily long-term and fee-based gathering and processing agreements with customers and counterparties in five unconventional resource basins.
Since going public in 2012, the company has continued increasing its distribution as the result of a number of acquisitions and investments that grew its footprint across most of the major shale plays. The company recently guided 2018 in line with expectations, and it should be another year of smooth growth and consistent distributions.
Summit investors enjoy a huge 14.2% distribution. The $22 Baird price target compares with a posted consensus target of $17.67, as well as the most recent closing share price of $16.20.
Huge payouts that have remained consistent, along with the ability for the share prices to go higher, make these solid plays for more aggressive income accounts looking for energy exposure.