Is Westlake's Ethylene Bull Run Over?

This week I'm seeking a prestigious and long-term dividend-paying stock from the basic materials sector. 

The materials sector includes thirteen industries all related to mining, making and delivering essential commodities. The industries are: agricultural inputs; aluminum; building materials; chemicals; coal; copper; industrial metals and minerals; paper; silver; specialty chemicals; steel.

Today I'm reviewing a small-cap chemicals firm named Westlake Chemical Partners LP. It's trading ticker symbol is WLKP. Just two weeks ago I reviewed this same stock for the Safari portfolio on Monday, August 27. 

It's another Westlake Monday!

Westlake Chemical Partners LP operates, acquires and develops facilities for the processing of natural gas liquids as well as other qualified assets.

The company operates ethylene production facilities, which primarily convert ethane into ethylene. It also sells ethylene co-products, including propylene, crude butadiene, pyrolysis gasoline, and hydrogen directly to third parties on a spot or contract basis.

Westlake Chemical Partners GP LLC serves as the general partner of the company. 

The company was founded in 2014 and is headquartered in Houston, Texas.

I use three key data points to gauge the value of any dividend equity or fund like Westlake Chemical Partners LP: 

(1) Price

(2) Dividends

(3) Returns

Besides those three, four more keys will finally unlock an equity or fund in which to invest.

But those first three primary keys, best tell whether a company has made, is making, and will make money. 

WLKP Price

Westlake's price per share was $25.00 at Friday's market close. A year ago its price was $23.95 for a gain of $1.05 per share.  

Assuming WLKP's price will trade in the range of $20 to $30 next year, perhaps that $1.05 gain could double to $2.10 and take WLKP's current $25.00 price to $27.10 by early September 2019. 

WLKP Dividends

Westlake's most recent quarterly dividend was $0.41 declared July 31st and paid August 24th. That dividend was increased from $0.3975 paid the previous quarter.

At this most recent quarterly pay rate, Westlake's annual dividend is calculated at $1.64 yielding 6.56% at Friday's closing $25.00 price.

Gains For WLKP?

Adding the $1.64 estimated annual dividend to the $2.10 estimated on year price gain for Westlake makes a $3.74  gross annual per share gain, which will be reduced by costs to trade the shares.  

 $1,000.00 invested today at the $25.00 recent price buys 40 Westlake Chemical Partners LP shares. 

A $10 broker fee paid half at purchase and half at sale costs $0.25 per share

Subtracting that $0.25 brokerage cost from the estimated $3.74 gross gain leaves a net gain of $3.49 X 40 shares 

= $139.60

or a near 14% net gain on a $1000 investment.

Therefore, Westlake Chemical Partners LP, whose trading ticker symbol is WLKP, now shows a possible 14% net gain including a 6.56% dividend yield. 

Six brokers cover this stock:

Four say "buy" WLKP.

Two say WLKP is a stock to "hold".

Thus, the analyst consensus recommendation number is 1.7 or "outperform". 

The median price target set by those six brokers is $1.82 over the $27.10 year over year price target I named. 

Looks like this Texas bull still has some charge.

So, you could look at all those various numbers this way, Westlake Chemical Partners LP has made money, is making money, and could net a 14% net annual gain including a 6.56% dividend yield. It could be more, it could be less.

The above speculation is based on past year performance. Actual results remain to be seen. Those results will determine if Westlake Chemical Partners LP is worth your time and money.