3 High-Yield Energy Stocks to Buy as Oil Demand Soars

NYSE: WES | Western Midstream Partners, LP Common  Limited Partner Interests News, Ratings, and Charts

WES – Oil production cuts implemented by OPEC member countries and other producers, and rising energy demand with the reopening of industrial activities worldwide, augur well for the global oil market. Consequently, oil prices have rebounded to pre-pandemic levels in recent weeks. Hence, we think it wise to bet on the stocks of Western Midstream (WES), Enable Midstream (ENBL), and Star Group (SGU). In addition to price appreciation, these stocks’ high dividend yield could ensure solid total returns for investors. Read on for details, please.

The oil & gas industry has made an impressive comeback from historical lows hit in April last year. Its robust rebound was mainly led by OPEC members and their allies, who implemented  unprecedented production cuts to support prices after demand plunged during the pandemic. In the 14th OPEC and non-OPEC Ministerial Meeting on March 4,  OPEC and non-OPEC ministers agreed to maintain current, reduced,  production levels this month and in April.  Saudi Arabia added  that it would extend its 1m b/d voluntary production cut into April.

Also, the U.S.’ recent $1.9 trillion coronavirus relief package has started driving consumer spending. This, coupled with a fast-paced, national vaccination drive, is expected to revive industrial production significantly, thereby boosting energy demand. According to the U.S. Energy Information Administration’s latest forecast, U.S. crude production will average 11.10 million b/d in 2021, down from 11.30 million b/d in 2020 and 12.30 million b/d in 2019.

While some analysts predict the burgeoning clean energy movement will be a potential threat to the oil & gas industry, the demand for oil is not expected to be much affected in the near future given the sizable investments and time still needed to make renewable energy truly competitive with fossil fuels.

Hence, we think Western Midstream Partners, LP (WES), Enable Midstream Partners, LP (ENBL), and Star Group, L.P. (SGU) could deliver substantial gains in the near term. These stocks’ high dividend yield makes them even more attractive investments amid the current market volatility.

Western Midstream Partners, LP (WES)

WES gathers, compresses, treats, processes, and transports natural gas. It also gathers and  of produced water (a byproduct of oil & gas operations) for its customers. The company also buys and sells natural gas, natural-gas liquids, and condensate.

Yesterday, WES priced aa secondary public offering of 10,000,000 common units, representing limited partner interests in WES, by an affiliate of Occidental Petroleum. The offering raised  $173.5 million.

WES recently completed the sale of its 14.8% equity interest in Fort Union Gas Gathering, LLC, with an option agreement to sell WES’s Bison treating facility for an upfront consideration of $27.0 million.

WES’ operating income increased 11.8% year-over-year to $372.95 million in the fourth quarter, ended December 31, 2020. Its adjusted ebitda  has risen 8.1% from the year-ago value to $483.98 million, while its free cash flow has improved 941.3% to $464.74 million.

Analysts expect WES to report an EPS of $2.38 in its  fiscal 2021 (ending December 31), up 101.7% year-to-year. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 134.7% over the past six months.

WES pays a quarterly dividend of $0.31, cumulating as  an annual dividend of $1.24, representing a  7.19% yield. The company’s four-year average dividend yield is 8.87%.

WES’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

WES has a B grade  for Sentiment, Quality, and Momentum. Of the 41 stocks in the B-rated MLPs – Oil & Gas industry, the stock is ranked #2.

In total, we rate WES on eight different levels. Beyond what we stated above, we also have given WES grades for Growth, Value, and Stability. Get all WES’s ratings here.

Enable Midstream Partners, LP (ENBL)

ENBL owns, operates and develops strategically located natural gas and crude oil infrastructure assets. The company operates in two business segments: Gathering and Processing, and Transportation and Storage.

Last month, ENBL forged a merger agreement with Energy Transfer LP (ET), in which  ET will acquire ENBL in an all-equity transaction valued at approximately $7.2 billion. This combination of ET’s significant infrastructure with Enable’s complementary assets will allow the combined company to pursue additional commercial opportunities and achieve cost savings, while enhancing ENBL’s ability to serve customers.

ENBL’s transportation and storage segments’ gross margin has increased 2.2% year-over-year to $142 million in the fourth quarter ended December 31, 2020, due primarily to an increase in transportation and storage services. Its operating income has risen 124.2% from its  year-ago value to $139 million, while its EPS has improved 850% to $0.19.

Analysts expect ENBL’s revenues to grow 18% year-over-year to $2.91 billion in its  fiscal 2021 (ending December 31). A  consensus EPS estimate of $0.65 for the current year represents  a 3.2% improvement from the year-ago value. The stock has gained 61.5% over the past six months.

ENBL pays a quarterly dividend of $0.17, culminating in  an annual dividend of $0.66, which represents a 10.03%. The company’s four-year average dividend is 13.56%.

ENBL has a B grade for Momentum and Value in our POWR Ratings system. It is ranked #13 in the same industry.

Click here to see the additional POWR Ratings for ENBL (Stability, Quality, Growth, and Sentiment).

Star Group, L.P. (SGU)

SGU specializes in the sale of home heating products and services to residential and commercial customers. The company also sells diesel, gasoline, and home heating oil on a delivery only basis. It  provides plumbing services and installs, maintains, and repairs heating and air conditioning equipment.

SGU’s operating income has increased 29.1% year-over-year to $54.79 million in the fourth quarter, ended December 31, 2020. Its adjusted ebitda  has risen slightly from its  year-ago value to $45.35 million, while its EPS has improved 51% to $0.74, due  primarily to a favorable change in the fair value of derivative instruments, and lower depreciation and amortization expenses. The stock has gained 8.2% over the past six months.

SGU pays a $0.13 quarterly dividend, which  an annual dividend of $0.53, representing a  5.1% yield. The company’s five-year average dividend yield is 5.08%.

SGU’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. SGU has an A grade  for Quality and Value, and a B for Growth and Sentiment. It is currently ranked #1 of 41 stocks in the same industry.

Click here to see the additional POWR Ratings for SGU (Stability and Momentum).

The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Want More Great Investing Ideas?

“MUST OWN” Growth Stocks for 2021

How to Ride the NEW Stock Bubble?

5 WINNING Stocks Chart Patterns

Why Are Stocks Struggling with 4,000?

 

 


WES shares were trading at $18.17 per share on Wednesday afternoon, up $0.87 (+5.03%). Year-to-date, WES has gained 34.22%, versus a 4.50% rise in the benchmark S&P 500 index during the same period.


About the Author: Rishab Dugar


Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
WESGet RatingGet RatingGet Rating
ENBLGet RatingGet RatingGet Rating
SGUGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Top 10 Value Stocks

The S&P 500 (SPY) has shown mixed results in the last week, but if you are a value investor, then yesterday was a big day. That’s when we revealed to our readers the fatal flaws of traditional value investing and the solution to this problem—our Top 10 Value Stocks strategy. Read on below to find out more about this 3-step process and its +38.63% annual returns…

:  |  News, Ratings, and Charts

5 Cheap Growth Stocks for Q2 2021

After a brief selloff in Q1 2021, growth stocks are once again in focus. Investors can take advantage of this by investing in growth companies such as Johnson & Johnson (JNJ), Target (TGT), Dell Technologies (DELL), Agilent Technologies (A), and Goldman Sachs (GS) that are trading at low valuations.

:  |  News, Ratings, and Charts

2 Buy-Rated Big Data Stocks to Own for the 5G Revolution

The 5G revolution is expected to drive the growth of cloud computing and data analytics in the coming months as most industries exploit faster execution. As such, we think big-data stocks Teradata (TDC) and Cloudera (CLDR) could witness solid upside in the coming months. Read on.

:  |  News, Ratings, and Charts

Grab These 2 Beaten Down Tech Stocks Before They Rebound

While tech shares soared last year, some stocks saw their shares retreat in 2021. In fact, a number of solid companies have been beaten down over the past few weeks, which provides a great buying opportunity. Read more to learn why Patrick Ryan thinks you should consider F5 Networks (FFIV) and MACOM Technology Solutions Holdings (MTSI).

:  |  News, Ratings, and Charts

2 Buy-Rated Big Data Stocks to Own for the 5G Revolution

The 5G revolution is expected to drive the growth of cloud computing and data analytics in the coming months as most industries exploit faster execution. As such, we think big-data stocks Teradata (TDC) and Cloudera (CLDR) could witness solid upside in the coming months. Read on.

Read More Stories

More Western Midstream Partners, LP Common Limited Partner Interests (WES) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All WES News