Market Overview

10 Energy Stocks with Yields Up to 11%


BOSTON (TheStreet) -- Master limited partnerships, or MLPs, are required to pay hefty quarterly distributions to shareholders in exchange for avoidance of corporate income taxes. That's a boon to investors surrounded by skimpy dividends and bond yields.

MLPs are typically involved in the oil and gas business, specifically exploration, storage and transportation. MLPs offer some of the highest yields in the stock market, but their distributions are taxed differently than dividends. Often, the majority of quarterly payouts are tax-deferred, making MLPs even more attractive income investments. MLP investors receive a K-1 form annually, indicating the tax treatment of the previous four payouts.

Here are 10 MLPs with enormous yields. Each yields between 7.2% and 11%. Although MLPs are more complicated than traditional equities, they have proven to be outstanding income investments and operate reliably profitable businesses, particularly noteworthy in today's sputtering economy. Below, they are ordered by yield, from high to highest.

10. NuStar Energy (NYSE: NS) terminals, stores and transports petroleum products. Second-quarter net income increased 19% to $99 million, but earnings per share climbed just 3% to $1.43, hurt by a higher share count. Revenue grew 14%. The operating margin rose from 8.5% to 9.1%. NuStar's stock sells for a book value multiple of 1.4 and a sales multiple of 0.9, 64% and 49% discounts to peer averages. Of analysts evaluating NuStar, four, or 29%, rate its stock "buy", eight rate it "hold" and two rank it "sell." A median price target of $61.40 suggests a return of 3.3%.

9. Global Partners (NYSE: GLP) is a wholesale distributor of oil and natural gas. The company swung to a second-quarter loss of $1.1 million, or 7 cents a share, from a profit of $980,000, or 7 cents, a year earlier. Revenue grew 27%. The operating margin narrowed from 0.4% to 0.2%. Global Partners shares trade at a forward earnings multiple of 11, a book value multiple of 1.8 and a sales multiple of 0.1 -- 14%, 55% and 97% discounts to oil and gas peer averages. One analyst rates the stock "buy" and three rank it "hold." A median target of $25.50 implies 2% upside.

8. Linn Energy (Nasdaq: LINE) is an independent oil and gas developer. Linn swung to a second-quarter profit of $60 million, or 40 cents a share, from a year-earlier loss of $268 million, or $2.31. The operating margin climbed to 51%. Linn's stock trades at a book value multiple of 1.6, a 60% discount to the industry average. It's expensive based on forward earnings, sales and cash flow. Six, or 86%, of researchers following the company advise purchasing its shares and one recommends holding. None say to sell. A median target of $34.17 suggests a return of 12%.

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