One Way For High-Yield Energy Midstream Stocks To Boost Share Prices

The midstream energy sector has been a scary place for investors. Despite high dividend yields, it seems that no kind of news will stop the relentless slide in share prices. It has been tough for investors to stick with their energy midstream stock investments, with share values dropping 10%, 20%, or more, even as the rest of the stock market moves higher into record territory. I am convinced that midstream stock values will turn around, and I have a trigger event/”cure” to look for, which will signal higher share prices on the horizon.

Energy midstream companies gather, process, store, and transport energy commodities, crude oil, natural gas, and fuels from the producers to the end-users. In 2014, most of the companies were organized as master limited partnerships (MLPs). Midstream, along with the rest of the energy sector, went through a deep bear market from late 2014 until early 2016.

The sector crash pushed many midstream companies into big restructuring plans. Growth projects were restructured or canceled, balance sheets were tightened up, the MLP structure was changed or modified, and a lot of dividends were reduced. In fact, for the 2019 third quarter, it was the first quarter in well over a year when not a single MLP reduced its dividend rate, and half announced rate increases.

The investing public has not forgiven the midstream sector for the dividend cuts and is ignoring the much stronger financial fundamentals of all the companies in the group. Share prices continue to drop, which causes more investor pain, which leads to more selling, which leads to further value declines. The investing public is ignoring the substantial improvement in fundamentals out of the midstream sector. There appears to be nothing that will get more investors interested in the sector, which would stimulate buying and share price appreciation.

Eventually, a business sector with solid economics that pays excellent dividends will recover. I am ready for the selling to end, and here is what I think will trigger a turnaround in share prices.

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Disclaimer: The information contained in this article is neither an offer nor a recommendation to buy or sell any security, options on equities, or cryptocurrency. Investors Alley Corp. and its ...

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