Investors looking for stable income amid the recent market turbulence should consider Penn Virginia Resource Partners, L.P. (PVR).
The company pays a distribution that yields a juicy 7.9%, and it did not cut this distribution during the Great Recession. That’s a good sign if another recession is right around the corner.
Earnings estimates have been rising after the company reported a solid second quarter. It is a Zacks #2 Rank (Buy) stock.
Company Description
Penn Virginia Resource Partners, L.P. owns and manages coal and natural resource properties and related assets, and owns and operates midstream natural gas gathering and processing businesses.
The company was founded in 1882 and has a market cap of $1.8 billion.
Second Quarter Results
Penn Virginia reported solid second quarter results on July 27. Revenue surged 64% to $310.3 million, well ahead of the Zacks Consensus Estimate of $258.0 million. The increase was driven by contributions from the Natural Gas Midstream as well as the Coal and Natural Resource Management segments.
The Natural Gas Midstream Segment, which represented 83% of total revenue, saw a remarkable 74% increase in revenue year-over-year due to significantly higher volumes. The Coal and Natural Resource Management Segment saw revenue growth of 27% due to increased production and higher coal royalties.
Operating income was up 82% year-over-year as operating expenses fell from 87.5% to 86.1% of total revenue. Second quarter adjusted earnings per unit came in at 32 cents, missing the Zacks Consensus Estimate by 4 cents.
Strong Growth Ahead
Despite the earnings miss, analysts have been raising their estimates for both 2011 and 2012, sending the stock to a Zacks #2 Rank (Buy). Based on consensus estimates, analysts project 53% earnings per unit growth this year and 21% growth next year.
Strong Distribution
On top of this growth, Penn Virginia pays a distribution that yields a whopping 7.9%. The company held its distribution steady throughout the Great Recession and has increased it at an average annual rate of 8.6% since going public back in 2002.
Reasonable Valuation
Valuation looks reasonable with shares trading at 17.1x 2011 earnings, a slight discount to its historical median of 17.8x forward earnings.
The Bottom Line
With rising earnings estimates, strong growth projections, very solid income, and reasonable valuation, this Zacks #2 Rank (Buy) stock looks very attractive in this market.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research.
PENN VA RESRC (PVR): Free Stock Analysis Report
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