Teekay LNG Partners L.P.
) offers investors an attractive one-two punch of growth and
income. The partnership pays a distribution that currently yields a
very attractive 7.8%. And analysts expect recent additions to its
fleet to drive strong earnings growth in the near future.
It is a Zacks #2 Rank (Buy).
Liquefied Natural Gas
Teekay LNG Partners provides liquefied natural gas (
) and crude oil marine transportation services under long-term,
fixed-rate contracts primarily with major energy and utility
companies. The contracts usually run 10-25 years in duration,
providing it with stable cash flow.
It was founded in 2004 by Teekay Corporation (
) and has a market cap of $2.1 billion.
Third Quarter Results
Teekay LNG Partners reported better than expected results for the
third quarter of 2011. Earnings per limited partner unit came in at
47 cents, beating the Zacks Consensus Estimate of 45 cents.
Distributable cash flow jumped 19% year-over-year to $43.7 million.
The distribution coverage ratio (distributable cash /
distributions) was a healthy 1.08x.
Meanwhile, revenue rose 5% to $97.256 million. And operating income
rose 16% year-over-year as the company leveraged its fixed
Management announced that it will recommend to the board of
directors a 7% increase to the quarterly distribution. This would
raise it to $0.675 per unit, beginning in May 2012. This
corresponds with a whopping 7.8% distribution yield.
As you can see, TGP has a history of steadily raising its
distributions, even during the Great Recession:
Analysts raised their estimates for both 2011 and 2012 following
strong third quarter results. This sent shares to a Zacks #2 Rank
The Zacks Consensus Estimate for 2011 is $1.71, representing 8%
growth over 2010 earnings per unit. The 2012 consensus estimate is
currently $1.98, corresponding with 16% growth.
Analysts expect a combination of stable long-term contracts,
acquisitions and new projects to drive solid earnings growth going
The valuation picture looks reasonable for TGP. Shares trade at
17.5x 12-month forward earnings, a discount to the industry median
of 21.3x, and its historical median of 18.9x.
The Bottom Line
With rising estimates, strong growth projections, a juicy 7.8% and
reasonable valuation, TGP offers investors strong total return
Todd Bunton is the Growth & Income Stock Strategist for
and Co-Editor of the
Reitmeister Value Investor
TEEKAY LNG PTNR (
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