5 Tax-Advantaged MLPs with High Dividend Yields

1. Antero Midstream Corporation (NYSE: AM)

Number of Hedge Fund Holders: 16
Dividend Yield: 9.55%

Antero Midstream Corporation (NYSE: AM) owns and operates midstream energy infrastructure and ranks 1st on our list of tax-advantaged MLPs with high dividend yields. The company operates through its Gathering and Processing, and Water Handling segments.

Mark Carlucci, an analyst at Morgan Stanley, upgraded shares of Antero Midstream Corporation (NYSE: AM) from Underweight to Equal Weight this March. The analyst also raised his price target on Antero Midstream Corporation (NYSE: AM) shares from $6 to $11.

In the second quarter of 2021, Antero Midstream Corporation (NYSE: AM) had an EPS of $0.23, beating estimates by $0.01. The company’s revenue was $232.79 million, up 5.94% year over year and beating estimates by $11.90 million. Antero Midstream Corporation (NYSE: AM) has gained 6.8% in the past 6 months and 23.46% year to date.

By the end of the second quarter of 2021, 16 hedge funds out of the 873 tracked by Insider Monkey held stakes in Antero Midstream Corporation (NYSE: AM) worth roughly $106 million. This is compared to 17 hedge funds in the previous quarter with a total stake value of approximately $123 million.

Bonhoeffer Capital Management, a value-oriented investment management firm, mentioned Antero Midstream Corporation (NYSE: AM) in its fourth-quarter 2020 investor letter. Here’s what they said:

“Public LBOs (32% of Portfolio; Quarterly Average Performance +25%)

This includes our broadcast TV franchises, leasing and roll-on/roll-off (RORO) shipping, and our natural gas pipeline firm. One trend in these levered firms is the increasing spread between bond yields and the firms’ free cash flow yield.

An example is Antero Midstream, whose FCF yield was 15% as of December 31, 2020, with a debt yield of 6% with the bond/equity FCF spread of 9%. This is a large spread given that Antero Midstream has completed its backbone infrastructure and gathering investment and capital expenditures should be small going forward. With natural gas prices rebounding, Antero Midstream cash flows become more secured as Antero Resources has more cash flow cushion in making payments to Antero Midstream. The recovery in natural gas prices is expected to continue as the economy opens up and low oil prices have shut down Permian oil wells that were generating almost-free associated natural gas. Antero Midstream’s FCF yield of 15% is also higher than similarly secured Antero subordinated debt with a yield of 7.8%.”

See also 10 Most Profitable Cash-Only Businesses To Avoid Taxes and Billionaire James Dinan’s Top 10 Stock Picks.

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