Wednesday September 26, 2012
by Neil Macneale, editor 2-for-1 Stock Split Newsletter
Each month, we add one stock to our model portfolio chosen from among those that have announced stock splits; using this strategy, we have earned a 10.22% annualized return over the past 17 years.
This month, we are assessing a pair of 2 for 1 splits for our portfolio, and they run a very close race:
Plains All American Pipelines LP (
PAA) and
Magellan Midstream Partners LP (
MMP), which are both North American oil and gas pipeline companies.
Plains All American owns and operates thousands of miles of pipelines, storage facilities, terminals and other oil and gas infrastructure.
It has been growing through acquisitions in recent years and would now be classified as a medium sized operation in this type of business.
Plains All American has a price-to-book ratio significantly lower than its peers and earnings growth significantly higher. It pays a 4.9% dividend.
Magellan Midstream is a very similar business but has a somewhat higher PE and price-to-book ratio. It has more debt than Plains but is also more profitable. It pays a 4.5% dividend.
Both companies have a much lower volatility index than the overall market. These are good solid businesses providing a vital service needed through good times and bad. They get paid regardless of the price fluctuations in gas and oil.
Our ranking algorithm puts Plains ahead of Magellan, but it would seem either one would be a fine addition to any growth or income portfolio.
Learn more about this financial newsletter at Neil Macneale's 2-for-1 Stock Split Newsletter.
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