The following oil and gas stocks offer very high forward dividend yields, which are significantly higher than the monthly spot rate of 4.45% on 20-year high-quality market corporate bonds. The forward dividend yield and the spot rate are based off prices at market close on Tuesday.
The high-quality market corporate bonds are securities representing the corporate loan issued by companies that are triple-A, double-A and single-A rated.
I screened the energy sector as most analysts are expecting these stocks to improve their performance compared to the S&P 500 index within the next 12 months.
Compared to the spot rate of 4.45%, the forward dividend yield of the following stocks is at least 40% higher. A forward dividend yield at this level reduces the risk of purchasing an overpriced stock.
Dividend investors may want to consider the following energy stocks:
SemGroup Corp. (SEMG, Financial) closed at $21.42 per share on Tuesday. The forward dividend yield increased to 8.63% following a 26% decline for the 52 weeks through Oct. 9. The stock has a market capitalization of about $1.69 billion, a price-book ratio of 1.11 versus an industry median of 1.74 and an enterprise value-to-earnings before interest, taxes, depreciation and amortization ratio of 13.9 versus an industry median of 12.84.
The share price is below the 200-, 100- and 50-day simple moving average lines. The 52-week range is $20.2 to $30.95.
SemGroup provides midstream services to producers and refiners of petroleum products. The range of services include gathering, transportation, storage, distribution and marketing.Â
The company's financial strength and profitability and growth were both rated 4 out of 10 by GuruFocus.Â
During the second quarter, Steven Cohen established a 50,800-share position.
The recommendation rating is 2.8 out of 5 and the average target price is $25.91 per share.
CVR Energy Inc. (CVI, Financial) closed at $39.13 per share on Tuesday. For the 52 weeks through Oct. 9, the share price climbed 41% and the forward dividend yield went up to 7.53%. The stock has a market capitalization of about $3.4 billion, a price-book ratio of 3.8 versus an industry median of 1.75 and an EV-to-EBITDA ratio of 9.46 compared to an industry median of 8.25.
The share price is above the 200-, 100- and 50-day simple moving average lines. The share price at close on Oct. 9 is 47.2% off the 52-week low of $26.57 and 22% below the 52-week high of $47.67.
CVR Energy is a petroleum refiner and a nitrogen fertilizer producer.
GuruFocus assigned a financial strength rating of 6 out of 10 and a profitability and growth rating of 4 out of 10.
During the second quarter, Leucadia National purchased 10,000 shares and Cohen invested in 1,252 shares.
Chuck Royce increased his positions by 31.55% to 838 shares.
Joel Greenblatt reduced his position by 66.52% to 79,305 shares, Murray Stahl trimmed his position 21.98% to 10,408 shares and Jim Simons reduced his position by 16.18% to 751,400 shares.
Paul Tudor Jones and Hotchkis & Wiley sold out.
The recommendation rating is 2 out of 5.
Targa Resources Corp. (TRGP, Financial) closed at $58.02 per share on Tuesday. After a 21% increase for the 52 weeks through Oct. 9, the forward dividend yield rose to 6.31%. The stock has a market capitalization of $13.09 billion, a price-book ratio of 2.13 versus an industry median of 1.74 and an EV-to-EBITDA ratio of 16.52 versus an industry median of 12.84.
The share price is above the 200-, 100- and 50-day simple moving average lines. The 52-week range is $39.59 to $59.21.
Targa Resources is a midstream energy company operating off the Gulf Coast of Texas and Louisiana.
GuruFocus assigned a financial strength rating of 5 out of 10 and a profitability and growth rating of 4 out of 10.
During the second quarter, Barrow, Hanley, Mewhinney & Strauss initiated a position, purchasing 407 shares.
T Boone Pickens increased his position by 3.53% to 187,644 shares and Pioneer Investments increased its position by 398.8% to 686,579 shares.
Cohen reduced his holding by 74.92% to 142,400 shares and Louis Moore Bacon reduced his position by 20% to 40,000 shares.
The recommendation rating is 2.1 out of 5 and the average target price is $59.43 per share.
Disclosure: I have no positions in any securities mentioned in this article.
