Diversified midstream energy operator Genesis Energy L.P. (GEL - Snapshot Report) gave its investors a reason to cheer as it increased its fourth quarter 2013 cash distribution to 53.5 cents per unit ($2.14 per unit annualized). This represents an increase of approximately 2.4% sequentially and 10.3% year over year.
Genesis Energy has been consistently increasing its distribution, which indicates financial stability that may attract investors looking for a steady income. The latest payout marks the 34th consecutive quarterly distribution hike by the pipeline operator, of which 29 increases have been 10% or more year over year. The quarterly distribution is payable on Feb 14, 2014 to unitholders of record as of Jan 31, 2014.
Houston, Texas-based Genesis Energy is a master limited partnership that operates crude oil pipelines and is an independent gatherer and marketer of crude oil in North America, with operations concentrated in Texas, Louisiana, Alabama, Florida, Mississippi and New Mexico. Genesis Energy engages in three business segments: Pipeline Transportation, Refinery Services, and Supply and Logistics.
Genesis Energy has a business model focused on operational efficiencies and attractive acquisitions/growth projects. With a juicy yield of 4.0%, the partnership offers investors a steady, predictable income stream.
However, valuation looks expensive for the stock. It has a forward PE of 30.2, much higher than its peer group average of 16.54. Moreover, the partnership has a price-to-book (P/B) ratio of 4.2, which suggests that the stock is overvalued (a P/B ratio under 3.0 generally indicates value).
Genesis Energy currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked energy sector stocks of Helmerich & Payne, Inc. (HP - Analyst Report) , Harvest Natural Resources Inc. and Athlon Energy Inc. . All these stocks currently sport a Zacks Rank #1 (Strong Buy).