Friday, February 3, 2012

Bullish Chart And High Dividend Yield : APL, ARLP, DPM, TOO


With the U.S. stock market breaking out into multi-month highs, it is common to look for charts that show bullish momentum. At the same time, I would like to find stocks that pay above-average dividend yields to protect against a flat or down market.

It was surprising to find out that a high number of big dividend-paying stocks also have bullish charts to back them up. Of the list that was compiled, there were four stocks that rose to the top.

Oil & Gas
Atlas Pipeline Partners LP
(NYSE:APL) provides gathering, processing and treating services for the natural gas industry, mainly in the Anadarko and Permian Basins. The stock pays a 5.9% dividend and trades with a PEG ratio of 0.33. The combination of yield and attractive valuation make APL fundamentally sound for potential investment.

The chart shows a stock that rallied to a new three-year high earlier this month, before pulling back to support at the $36 area. As long as APL can hold above $36, it looks like the stock should continue the current trend higher.

DCP Midstream Partners LP (NYSE:DPM) provides nearly identical services as APL, with heavy concentration in the middle of the U.S. The company operates in three segments: natural gas services, wholesale propane logistics and logistics. The stock has a dividend yield of 5.4% and a PEG ratio of 5.5. The yield is great, but the PEG leaves a lot to be desired. Technically, the stock is trading just below an all-time high set in 2007, and if it can break out to new highs, it would be the next buy signal to flash.

Coal
Alliance Resource Partners LP
(Nasdaq:ARLP) is involved in the production and marketing of coal through its operation of nine underground mines located in the U.S. The company also leases land and offers related services to the coal mining industry. The 4.9% dividend yield and PEG of 0.9 make the stock attractive for investors looking to gain exposure to the coal sector.

What really differentiates ARLP from its competitors is the technical analysis. Overall, coal stocks have struggled, but ARLP is not far from an all-time high. Being a leader in a sector that is poised to turn around at some point is a good place to be for ARLP.

Shipping
Teekay Offshore Partners LP
(NYSE:TOO) supplies the offshore oil industry with transportation and storage services. The company provides its customers with theses services with their over 50 tankers and vessels. A dividend yield of 6.9% has attracted investors to the stock and the recent breakout to a new multi-month high should add to that attraction. The PEG ratio could be considered high at 2.29, however the other factors make TOO a stock that must be watched.

The Bottom Line
All four stocks mentioned above are commodity-related and all are limited partnerships. It is not a coincidence that they all come from the same general industry. With the price of oil rising and the fact that LP's typically pay big dividends, it makes sense that the scan generated large stocks. The only warning I will give is that you do not want to overexpose yourself to the commodity sector in the event the global market slows.

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