Top High Yielding MLPs: Northern Tier Energy LP (NTI), Eagle Rock Energy Partners, L.P. (EROC)

Northern Tier Energy LP (NYSE:NTI) : This partnership is an energy company with refining, retail, and some pipeline operations in the Great Plains and Midwest area (PADD II region).

1). It currently has a very attractive P/E of just 5.83. Future P/E is slightly higher, at 8.13.

2). It has an average analyst target price of $27 (implying a potential 4.49% upside from current prices).

3). Insiders own almost 80% of the Partnership’s units.

4). It pays a whopping $3.52/unit. That works out to a mega-yield of almost 23%.

5). My take: Very attractive valuation, high insider ownership rates, and a whopping yield of 23% would suggest this stock is a strong buy. However, it is important to note that NTI is primarily a refinery operator, and as such benefits from the price difference between crude oil and refined products. When the spreads are wide, the company will profit greatly (and until-holders will receive massive yields), but if the price difference becomes smaller, then there is no guarantee that NTI will keep up on paying such high distributions. Essentially, that means that NTI investors will be exposed to the high volatility of the price spread sizes. That hardly means investors should not buy this stock, but they should expect more risk, and more volatility, than in other MLPs. However, more risk can also equal higher rewards.

The article Top High Yielding MLPs originally appeared on Fool.com and is written by Alex Bastardas.

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