3 Ways to Profit from the U.S. Debt Crisis that Wasn’t: Exelon Corporation (EXC) and More

Investors willing to take on more company-specific risk should continue to favor MLP spin-offs such as MPLX LP (NYSE:MPLX). I highlighted this investment opportunity when the company was still part of Marathon Petroleum Corp (NYSE:MPC).  The stock has been a home run and if history is a guide still has plenty of room to run.  Phillips 66 (NYSE:PSX) just announced its plans to spin-off assets into a newly formed MLP in 2013.  I would expect this stock to pop big on day one and then start a steady upward march similar to that enjoyed by MPLX.

Oil Majors — Core Holdings

The large-cap oil exploration space is filled with companies that have long-term secular growth opportunities, possess strong competitive economic moats, and payout a steady stream of dividends.  The current opportunity lies with European majors such as Royal Dutch Shell plc (ADR) (NYSE:RDS.A), TOTAL S.A. (ADR) (NYSE:TOT), and BP plc (ADR) (NYSE:BP).

These three companies pay a dividend yield of 5.2%, 6.1%, and 4.9%, respectively.  These three stocks are the highest dividend yielding names in the space.  Investors here shouldn’t anticipate a lot of capital appreciation given that production growth has slowed to a crawl, but long-term total return potential is favorable and stock volatility is likely to be contained absent a massive collapse in oil prices.  These stocks are also supported by attractive valuation as evidenced by the depressed price to tangible book value.

RDS.A Price / Tangible Book Value data by YCharts

The Foolish Bottom Line

Rising interest rates in the U.S. have historically been associated with underperformance from high yielding alternatives.  Such a scenario would likely create headwinds for utilities, master limited partnerships, REITs, and select equities with elevated yields.

However, this is an unlikely scenario for at least the next two years, thus investors shouldn’t abandon these favorable industries.  High yielding equity investments remain well positioned to achieve robust long-term gains given the low interest rate environment and improving global growth outlook.  Investors will benefit by patiently sticking with this theme and avoiding the fear grabbing headlines.

The article 3 Ways to Profit from the U.S. Debt Crisis that Wasn’t originally appeared on Fool.com and is written by Justin Carley.

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