3 high yielding stocks at very low prices

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Wwhen stock prices rise, dividend yields fall. Due to this inverse relationship, the rally S&P 500 Over the past year, the average share return of this index has fallen to around 1.4%.

However, while most stocks rallied over the past year, some haven’t quite caught up; they always trade at bargain prices. On a more positive note, they offer dividend yields. Three amazingly cheap income producers that stand out are energy master limited partnerships (MLP) Crestwood Equity Partners (NYSE: CEQP), EnLink Midstream (NYSE: ENLC), and Energy transfer (NYSE: ET).

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Cheap dirt no matter how you cut it

Through Improved Commodity Prices, Crestwood Equity Partners Expects To Generate $ 575 Million To $ 625 Million EBITDA this year, with $ 335 million to $ 385 million in distributable cash flow. This forecast suggests that MLP is ridiculously cheap.

For example, Crestwood currently has a enterprise value (EV) of $ 5.58 billion. So, this forecast implies that it is trading at an EV / EBITDA ratio of between 8.9 and 9.7, which is very inexpensive given that middle assets typically sell at a mid-teens multiple of their EBITDA. Meanwhile, Crestwood is even cheaper when you consider its price / cash flow ratio. At its current market cap of $ 1.9 billion, Crestwood trades between 4.9 and 5.7 times its cash flow.

Because it is so cheap, Crestwood has a high dividend yield which is currently around 8.4%. While such a high payout is usually a sign of trouble, that’s not the case with Crestwood. The company is on track to generate enough cash to cover its payment with around $ 130 million to $ 180 million to spare. Meanwhile, he only expects to invest $ 35-45 million in expansion projects this year, leaving him with plenty of excess cash. He intends to use this money to consolidate his already strong balance sheet and buy back some of his battered equity.

A money gusher

EnLink Midstream expects to generate $ 940 million to $ 1 billion in adjusted EBITDA this year. With a current enterprise value of approximately $ 8.5 billion, EnLink is trading at an EV / EBITDA of 8.5 to 9.0.

Thanks to this low valuation, EnLink is also offering a dividend which is currently earning 7.8%. This lucrative revenue stream is also on solid ground, as the company expects to generate between $ 275 million and $ 325 million in free cash flow after paying its dividend this year. This is more than enough to cover its $ 140 million to $ 180 million capital spending program.

Thus, EnLink will be able to repay part of its debt in order to maintain its solid financial profile and take advantage of acquisition opportunities. He recently agreed to purchase a collection and processing system at an initial cost of $ 50 million and up to $ 25 million in additional future payments.

Dirt cheap and get cheaper

Energy Transfer expects to produce between $ 12.9 billion and $ 13.3 billion in Adjusted EBITDA this year. With a current enterprise value of around $ 87.4 billion, the MLP is trading at an EV / EBITDA of 6.6 to 6.8.

Meanwhile, the company is in the process of acquiring its MLP rival. Activate intermediary partners (NYSE: ENBL) in a $ 7.2 billion deal. Enable will add around $ 1 billion in annual EBITDA to Energy Transfer’s tally, while the combination is expected to save the company around $ 100 million per year. This implies a purchase price of around 6.55 times EBITDA, making the company seem even cheaper on a combined basis.

Because it’s so cheap, Energy Transfer pays a dividend that currently pays around 6.1%. It covers this payment with a lot of leeway. In the first quarter alone, the company generated $ 3.5 billion in excess cash flow after paying its distribution. Because it only plans to invest $ 1.6 billion in capital projects for the year, Energy Transfer generates a surge of excess cash that it uses to pay down debt.

High yields thanks to low barrel valuations

MLPs have fallen out of favor among investors in recent years. This means that these companies are trading at ridiculously low prices, which has pushed up their dividend yields. For investors looking for low-cost income streams, this makes them attractive options.

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Matthew DiLallo owns shares of Crestwood Equity Partners LP and Energy Transfer LP. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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



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