Enbridge Energy Partners, L.P. (EEP) — This company gathers, processes and transports crude oil, liquid petroleum and natural gas in North America.
As a master limited partnership (MLP), S&P Capital IQ points out that it could be exposed to various risks, including cyclical demand swings for commodity transportation and the use of debt to fund dividends and capital expenditures. However, its analysts say the maturity of Enbridge Energy’s business and strong revenue and cash flow offset these risks.
EEP should benefit from rising throughput levels from western Canada and the Bakken shale. Last month, its parent company, Enbridge Inc (ENB), announced a decision to drop down its major interest in the U.S. segment of the Alberta Clipper pipeline to EEP for $900 million. The company estimated this could increase distributable cash flow by 3% per unit.
Credit Suisse (CS) commented favorably on the move, raising it 2015-2017 EBITDA estimates by 4%-5%. It also increased its price target to $42 from $39.
After a four-year consolidation with resistance at about $32, EEP stock broke to an intermediate trend channel in June. Shares ran above $40 in September before the across-the-board selling in energy stocks took its toll.
The pullback was stopped at the major support line (formerly resistance) at $32, and in the past five sessions, the intermediate trendline was reestablished as shares moved back into the trading channel that began in July/August. The 50-day moving average was also penetrated.
MACD is bullish and volume supports a move higher. Buy EEP stock at the market with a target of $42. An annual dividend of $2.22 per share provides a yield of almost 6%.
