Shell Midstream Partners (NYSE: SHLX) and Tallgrass Energy Partners (NYSE:TEP) are both mid-cap oils/energy companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, analyst recommendations, earnings, valuation and profitability.
Institutional & Insider Ownership
45.0% of Shell Midstream Partners shares are owned by institutional investors. Comparatively, 61.1% of Tallgrass Energy Partners shares are owned by institutional investors. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.
Shell Midstream Partners pays an annual dividend of $1.33 per share and has a dividend yield of 5.5%. Tallgrass Energy Partners pays an annual dividend of $3.86 per share and has a dividend yield of 9.9%. Shell Midstream Partners pays out 103.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Tallgrass Energy Partners pays out 99.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Shell Midstream Partners has raised its dividend for 4 consecutive years and Tallgrass Energy Partners has raised its dividend for 2 consecutive years. Tallgrass Energy Partners is clearly the better dividend stock, given its higher yield and lower payout ratio.
Earnings and Valuation
This table compares Shell Midstream Partners and Tallgrass Energy Partners’ gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Shell Midstream Partners||$470.10 million||11.61||$372.60 million||$1.28||19.05|
|Tallgrass Energy Partners||$655.90 million||4.37||$433.99 million||$3.90||10.03|
Tallgrass Energy Partners has higher revenue and earnings than Shell Midstream Partners. Tallgrass Energy Partners is trading at a lower price-to-earnings ratio than Shell Midstream Partners, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Shell Midstream Partners has a beta of 1.15, indicating that its share price is 15% more volatile than the S&P 500. Comparatively, Tallgrass Energy Partners has a beta of 1.03, indicating that its share price is 3% more volatile than the S&P 500.
This is a breakdown of current ratings and recommmendations for Shell Midstream Partners and Tallgrass Energy Partners, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Shell Midstream Partners||0||3||3||0||2.50|
|Tallgrass Energy Partners||0||4||7||0||2.64|
Shell Midstream Partners currently has a consensus price target of $30.67, suggesting a potential upside of 25.73%. Tallgrass Energy Partners has a consensus price target of $49.63, suggesting a potential upside of 26.82%. Given Tallgrass Energy Partners’ stronger consensus rating and higher possible upside, analysts plainly believe Tallgrass Energy Partners is more favorable than Shell Midstream Partners.
This table compares Shell Midstream Partners and Tallgrass Energy Partners’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Shell Midstream Partners||78.08%||-179.87%||26.36%|
|Tallgrass Energy Partners||66.17%||28.25%||11.21%|
Tallgrass Energy Partners beats Shell Midstream Partners on 10 of the 16 factors compared between the two stocks.
About Shell Midstream Partners
Shell Midstream Partners, L.P. is a master limited partnership company, which owns, operates, develops and acquires pipelines and other midstream assets. The Company conducts its operations through its subsidiary, Shell Midstream Operating, LLC. Its assets consist of interests in entities that own crude oil and refined products pipelines serving as key infrastructure to transport onshore and offshore crude oil production to Gulf Coast and Midwest refining markets and to deliver refined products from those markets to demand centers. As of December 31, 2016, it owned interests in seven crude oil pipeline systems, three refined products systems, one natural gas gathering pipeline system and a crude tank storage and terminal system. Its pipeline and terminal systems include Zydeco crude oil system, Auger crude oil system, Mars crude oil system, Bengal product system, Poseidon crude oil system, Odyssey crude oil system, Proteus crude oil system and Endymion crude oil system.
About Tallgrass Energy Partners
Tallgrass Energy Partners, LP owns, operates, acquires and develops midstream energy assets in North America. The Company operates through three segments: Crude Oil Transportation & Logistics, Natural Gas Transportation & Logistics and Processing & Logistics. The Crude Oil Transportation & Logistics segment includes the ownership and operation of a Federal Energy Regulatory Commission (FERC) crude oil pipeline system, and crude oil storage and terminaling facilities. The Natural Gas Transportation & Logistics segment is engaged in the ownership and operation of FERC regulated interstate natural gas pipelines and integrated natural gas storage facilities. The Processing & Logistics segment is engaged in the ownership and operation of natural gas processing, treating and fractionation facilities; the provision of water business services primarily to the oil and gas exploration and production industry, and the transportation of natural gas liquids (NGLs).
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