I’ve been looking at Energy stocks as I think the quarter will be bullish for them as oil prices go up. As I further my search, I noticed that the smaller companies do pay a substantial dividend. These companies usually have a higher deviation and move up and down more violently which puts bigger risk as well.
On April 18, USA Compression Partners, LP (USAC) announced a dividend of $0.525 for shareholders on record on April 29, 2019. This is a substantial dividend of over 13% per year from their market price. Stifel Nicolaus also gave a price target of $18 a few weeks ago which the stock is close to hitting soon. Also, the past year, six other brokerage companies gave a price target ranging from $18-22 which bodes well for future growth while collecting the dividend.
USAC only has a small market cap of 1.68B. This is much smaller than other LP companies and this gives them substantial chance of being bought out if they can succeed moving forward. Energy Transfer, LP (ET) owns 39.7 million shares of USAC which gives them 23% ownership of the company. You can bet that ET will increase their ownership on success and most likely lead to a buyout.
There are definitely other energy stocks that have potential for success. For example, Energy Transfers has a substantial dividend almost at 8%. I believe the Energy sector will perform this quarter and possibly the next but having a nice 13% dividend gives you some assurance that if things get worse you have a bit of a hedge. You also have the opportunity to invest in some growth with this smaller unknown LP.