2 Midstream Energy Stocks With Yields up to 7.3%

Looking for a high-yielding energy stock? If so, midstream stocks such as Gibson Energy Inc. (TSX:GEI) and Keyera Corp. (TSX:KEY) are prime options.

| More on:
The Motley Fool

If you’re interested in buying a high-yielding energy stocks with exposure to oil and natural gas, but also want to minimize your risk, then midstream energy stocks are for you. Midstream energy companies provide services such as processing, transporting, and storing oil, natural gas, and natural gas liquids, and most of these services involve long-term contracts that are fee-based, which means they are not directly impacted by the day-to-day fluctuations in commodity prices.

With all of this being said, let’s take a look at two of the best midstream energy stocks that you could buy today.

1. Gibson Energy Inc.

Gibson Energy Inc. (TSX:GEI) is one of North America’s largest independent midstream energy companies. Its services include the transportation, storage, blending, processing, marketing, and distribution of crude oil, liquids, and refined products, and it also provides emulsion treating, water disposal, and waste management services.

Gibson pays a quarterly dividend of $0.33 per share, or $1.32 per share annually, which gives its stock a yield of about 7.3% at today’s levels.

Investors must also make two very important notes.

First, the company’s 3.1% dividend hike in March has it on pace for fiscal 2016 to mark the fifth consecutive year in which it has raised its annual dividend payment.

Second, I think Gibson’s ample distributable cash flow (DCF), including the $219.5 million it generated in fiscal 2015, its reasonable payout ratio, including 73% of its DCF in fiscal 2015, and the additional cash flows that will be generated from its $346 million in projects that were commissioned in fiscal 2015 and the $400-600 million in projects that will be commissioned from 2016-2017, will allow its streak of annual dividend increases to continue for the next several years.

2. Keyera Corp.

Keyera Corp. (TSX:KEY) is one of Canada’s largest midstream energy companies. Its services include natural gas gathering and processing, natural gas liquids fractionation, transportation, storage, and marketing, and iso-octane production and sales.

Keyera pays a monthly dividend of $0.125 per share, or $1.50 per share annually, which gives its stock a yield of about 3.6% at today’s levels.

Investors must also make two very important notes.

First, the company’s two dividend hikes in 2015 have it on pace for fiscal 2016 to mark the sixth consecutive year in which it has raised its annual dividend payment.

Second, I think Keyera’s increased amount of distributable cash flow (DCF), including its 23.9% year-over-year growth to $482 million in fiscal 2015, its modest payout ratio, including 50% of its DCF in fiscal 2015, and the additional cash flows that will be generated from its $1.2 billion in projects that were recently commissioned and the +$1.5 billion in projects that will be commissioned from 2016-2018, will allow its streak of annual dividend increases to continue going forward.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »