After years of decline, Crestwood Equity Partners
However, dividend payouts have stopped falling. Also, not only have analysts stopped forecasting losses, but the company has made a key acquisition. With a recovery finally underway, CEQP stock could become a lucrative investment for some types of investors.
CEQP Hit By the Mid-Decade Oil Price Declines
Crestwood performs midstream activities in the oil and gas industry. This gives the company some degree of insulation from the extreme boom and bust cycles seen in the upstream (exploration and production) side of the industry.
However, even CEQP faces some exposure to oil prices. Crestwood Equity stock once traded at a split-adjusted price of almost $200 per share. The 2014-16 crash in energy prices hit Crestwood Equity hard, so much so that the CEQP stock price fell into the low single digits. As a result, the company implemented a one-for-ten reverse stock split in November 2015.
CEQP Stock Has Only Begun to Recover
In many cases, reverse splits merely delay the inevitable collapse of a company. However, the move may have saved CEQP stock. Crestwood Equity continued to fall before hitting a low of $7.90 per share in March 2016. Since that time, the equity has more than quadrupled. It now trades at close to $37 per share.
Moreover, after years of losses, light may have finally appeared at the end of the tunnel. Wall Street now projects consensus earnings for Crestwood Equity at 66 cents per share. If this prediction comes to pass, CEQP stock will claim its first annual profit since 2014. Analysts also believe that double-digit profit growth will continue until at least 2022.
Investors Benefit from its MLP Status
MLP stands for master limited partnership. As a limited partner in CEQP stock, investors provide capital, and the company returns dividends. Because MLPs do not pay corporate taxes, they retain more cash that they can pay in dividends.
That profit should help support the generous dividend of CEQP stock. Since 2017, the annual payout has stood at $2.40 per share. This amounts to a dividend yield of about 6.5%. The payout has declined since 2011 amid a falling stock price from earlier in the decade. However, rising profits lessen the likelihood of further cuts.
Is Now The Time To Buy CEQP Stock?
Given the financials, CEQP stock looks like a solid income play. Rising profits dramatically lower the likelihood of a dividend cut. Moreover, rising profits could even lead to the first hike in the payout since 2010.
The immediate prospects for stock price growth appear less apparent. CEQP stock trades at a forward price-to-earnings (P/E) ratio of about 25.6. Also, Crestwood releases its second-quarter earnings on July 30. The company has missed estimates in three of the four previous quarters. Moreover, earnings estimates continue to fluctuate with oil prices. For these reasons, investors may want to avoid buying before the earnings report.
However, over time, the double-digit profit growth should take the stock price steadily higher. Despite fluctuations, investors with a little patience and a desire for dividends will likely profit from a long-term investment in CEQP stock.
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