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15% Yield, Recession Resilient From Sprague Has Every Reason To Bounce Back

Published Wed, 27 Mar 2019 07:20:00 -0400 on Seeking Alpha

Co-produced with Treading Softly and PendragonY for High Dividend Opportunities
Investment Thesis
Sprague Resources (SRLP) is a downstream MLP (master limited partnership) that has taken blows from the market, and once again offers a 15.2% yield that is expected to be maintained over the next year. The stock pulled back recently due to factors that are unlikely to persist.

Today, investors are able to buy the stock at a valuation that is close to a five-year low and a yield of +15%. While SRLP has risks, including exposure to commodity prices, we believe that SRLP is a great stock to buy and hold for the long term.

Business Overview
SRLP is a downstream MLP that operates via customer-facing channels. These channels are separated into three reporting departments:
Source: SRLP Presentation
Of these departments, Refined Products, has been the largest of them due to SRLP's acquisition choices, but also the most seasonally based. As a downstream MLP, SRLP faces different challenges from those that most midstream MLPS face.
SRLP exists strongly in the downstream market; it purchases from midstream or upstream companies and resells it to their customers. The risk SRLP runs is the seasonality of its markets. For example, sales of their refined products are much stronger in the first and fourth quarters of the year - when heating is needed and fuel consumption is elevated.

(Source: SRLP Presentation)
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Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
GLOBAL PARTNERS 19.17   12.4 1.54 2.06 10.73
SUNOCO LP 31.35   20.8 1.51 3.30 10.51


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