Plains All American At New High, Dividend Yield At 4%

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Investors frustrated with low interest rates on savings and uncertainty about the stock market have found some comfort in master limited partnerships.

MLPs raise money from investors to finance their activities, most commonly oil and gas exploration, transportation and storage. The MLPs pay no taxes on profits but are required to make regular cash payments to their investors.

Plains All American Pipeline ( PAA ) is one such MLP. The stock offers the best of both worlds -- capital appreciation and a steady income stream. The shares are up 26% this year, almost triple the S&P 500. The annual dividend yield is 4%, about double the S&P 500 average.

On Monday, Deutsche Bank upgraded the stock to buy from hold.

PAA enjoys a 96 Composite Rating, third highest in the Oil & Gas-Transportation Pipeline industry group behindEQT Midstream Partners ( EQM ) andOiltanking Partners ( OILT ).

But PAA enjoys an advantage in that it trades more than 900,000 shares a day. That makes it more liquid and therefore less risky than its rivals. In fact, most of PAA's biggest competitors are thinly traded.

The stock boasts an Accumulation/Distribution Rating of A-, indicating strong demand.

The company said Jan. 7 that it would boost its quarterly payout to 56.25 cents a share, or $2.25 on an annual basis, from 54.25 cents. The company has increased the payout for 14 straight quarters and 33 out of the 35 quarters.

Profit rose 22% in the latest quarter on a 6% increase in revenue.

The company said it will report first-quarter earnings May 7 after the close. Wall Street expects a 23% gain to 97 cents a share on a 22% rise in revenue. Though profit margins are thin, cash flow per share has risen for six straight years.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: EQM , OILT , PAA

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