And the timing couldn’t be better…
WTI crude oil prices are up 15% on the year, breaking through the $70 a barrel level this week (Monday, May 7).
This is a watershed moment for oil investments. Oil hasn’t traded above $70 since 2014, and the breakthrough is a sign the commodity’s strength is back.
But higher oil prices aren’t just good for investors trading oil futures contracts. Higher oil prices mean more profits for well-run oil companies.
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And profitable companies are excellent investments for your portfolio…
That’s why when we saw PSXP stock enter our VQScore “Buy Zone,” we had to let you know right away.
The timing couldn’t be better.
You see, Phillips 66 Partners has been printing cash, even during the oil bear market. Now that the oil market cycle is on the upswing, this company’s potential is incredible.
Take a look…
Phillips 66 Partners Is Raking in Cash
Phillips 66 Partners is a mid-stream oil and gas company, operating a network of oil and gas pipelines connecting major hubs across the United States.
There’s no secret to Phillips 66 Partners success. They are a master limited partnership (MLP), a simple, yet lucrative business model for midstream oil companies.
You see, MLPs are given special tax incentives to operate, and because of their favorable tax treatment, they are required to pass on the majority of profits directly to shareholders.
That explains their robust dividend of $2.86 per share. That’s steady cash right back into your pocket.
But Phillips 66 Partners isn’t just a business with a favorable tax structure and dividend payout. PSXP is growing, and they have a proven track record of making money no matter what oil prices are doing.
That’s partially thanks to their arrangement with their founding company, Phillips 66 (NYSE: PSX).
You see, Phillips 66 helped create PSXP in 2013, and PSXP has exclusive contracts with Phillips 66 to transport and store their oil. And part of that agreement requires Phillips 66 to pay PSXP for use of its pipelines, even if it doesn’t transport any oil and gas.
That ensures PSXP is making money, even if demand for oil is down. Plus, PSXP gets all the benefits of higher pipeline volume when oil demand is up. That’s a win-win scenario for PSXP investors, and it’s how PSXP is able to consistently grow its earnings.
PSXP has grown earnings for five straight years, even though oil prices crashed in 2014 and fell to their lowest point in more than a decade in 2016. That impressive feat is a sign of a well-managed company built to thrive no matter what the broader market is doing.
And with oil prices back over $70 a barrel, its profits are going to soar. Analysts are already projecting earnings growth of 33% this year.
That could translate to PSXP stock jumping from $48.79 per share to $65 per share, a 33% climb in just 12 months.
While PSXP’s lucrative business model and growth prospects are enough to own the stock, you’re also not going to find a better time to buy it. Now that it’s entered our “Buy Zone” by hitting a VQScore of 4, it’s the perfect time to buy.
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