Buy Recommendation for Targa Resources Corp
Today I am recommending a buy entry in Targa Resources Corp. (NYSE:TRGP) for 30 Day Dividends subscribers. TRGP is one of the fast growth MLP GP companies I discussed in the June issue of the newsletter.
Targa Resources Corp. is the general partner of midstream MLP Targa Resources Partners LP (NYSE:NGLS). NGLS has been a steady 8% distribution growth company, and TRGP has used the general partner incentives structure to grow its dividends by 25% per year. Last year when MLPs and GP companies were hot, TRGP traded as high as $160 per share. The share value has dropped into the $100 range on the lower energy commodity prices, yet the company has maintained its growth rate and projects to continue to grow at similar levels into the future. The current Wall Street consensus dividend growth rate for the next three years is 21% per year. TRGP yields 3.6%, well above the typical yield of other MLP related companies with similar growth rates.
Over the past month, TRGP has sold off from about $104 to the current $92. Much of the selling has been market disappointment that the corporation will not follow the leads of Kinder Morgan Inc. and Williams Companies with their actions to roll the MLPs they operate into the corporate structure, eliminating the publicly traded partnerships.
In the low $90’s, TRGP is a tremendous value. My target gain from this trade entry will be a 10% gain from today’s closing price. I expect to hit that target within a couple of quarters and 5% or so dividend increase announcements. Note that TRGP is a corporation and pays 1099 reported dividends.
Recommendation: Buy TRGP below $93. Target Price: $102.30 for a 10% gain.