Generating High Yields from Low Oil Prices

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

I like to invest alongside CEOs that have a hot hand and, of late, one of them is Carl Icahn, as he has turned one strategic investment after another into huge profits. And while he dukes it out with the likes of Bill Ackman in the famed Herbalife battle or his most recent attack on Michael Dell surrounding the contested tender price of Dell Technologies (DVMT), which tracks VMWare Inc. (VMW), his other holdings within Icahn Enterprises LP (IEP) are performing exceptionally well. This week, I’m highlighting where to find high-yield income coupled with significant capital appreciation potential within the stable of Carl Icahn’s largest holdings.

Within the $8.64 billion in assets that make up Icahn Enterprises L.P., roughly $2.2 billion is invested in CVR Energy (CVI), a key player in the oil refining business with operations in nitrogen fertilizer. Refiners are in the midst of a boom, as there is a wide spread between the price of crude and what refined products like gasoline, diesel and jet fuel sell for, thereby increasing profits dramatically. Icahn Enterprises L.P. owns 82% of CVR Energy, along with $6.0 billion of other assets. I want to be able to provide a pure play on refining that carries with it a super dividend yield of 7.7%.

CVR Energy pays a cash dividend of 75 cents per share. Back on May 29, the company increased the quarterly dividend from 50 cents to 75 cents per share, or $3.00 annually, representing an annualized increase of $1.00 per share. With the stock trading around $39, there is no other refiner stock that pays a yield anywhere close to that of CVR Energy.

“Increasing CVR Energy’s quarterly dividend to 75 cents a quarter, or $3.00 annually, reflects the strength of our balance sheet and the exceptional operating performance of our business segments,” said Dave Lamp, its chief executive officer. “CVR Refining’s strategically located assets, coupled with flexible refining configurations and reliable operations, are well positioned to capture constructive refining market conditions, including regional crude spreads and diesel cracks. Going forward, CVR Energy will remain committed to providing outstanding value to its stockholders.”

Earnings are surging for CVI in the current refining market. Its third-quarter earnings per share (EPS) came in at $0.95 per share, beating forecasts by 11 cents. For 2018, revenues are expected to climb by 19.90% to $7.18 billion.

Shares of CVI traded as high as $47.67 in late May and as high as $44.80 in late October and have retreated to a much more attractive entry point of $39, where I view the stock as extraordinarily attractive. And unlike most charts of energy stocks, the chart of CVI is very constructive. I have a buy under price of $42.

To get in on great high-yield stocks like CVI Energy and other high-yield assets that also carry strong capital appreciation potential, go to my Cash Machine advisory [here] and sign up to receive weekly hotlines, a monthly newsletter and timely alerts for managing a high-yield portfolio that delivers a blended yield of 8-10% spread over between 20 and 25 holdings. I’ve cultivated this advisory over the past 18 years and it’s running like a fine-tuned income generating engine. Don’t end the year without a bonafide plan to give your income a substantial raise for 2019. That plan is to put Cash Machine in action!

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