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Behind Tallgrass Energy’s 8.7% Yield

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May. 16 2019, Published 3:12 p.m. ET

TGE’s yield

Tallgrass Energy (TGE) is trading at a yield of ~8.7%. The stock’s yield has remained high ever since the announcement of the merger of the precedent entities Tallgrass Energy Partners and Tallgrass Energy GP in March 2018, which was completed in June 2018. The acquisition of a controlling interest by the Blackstone Group (BX) in January 2019 also didn’t help the stock much. Tallgrass Energy stock is down ~1% in 2019, underperforming most of its midstream peers.

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Tallgrass Energy continues to raise its dividends. In Q1 2019, the company increased its quarterly dividend 1.9% sequentially. It represents a 15th consecutive increase since the company’s IPO in May 2015. Tallgrass Energy is structured as a partnership but taxed as a c-corporation, so it issues form 1099 instead of K-1.

Recommendations for TGE

Out of 12 Reuters-surveyed analysts covering Tallgrass Energy, two rated it as a “strong buy.” Nine analysts rated it as a “hold,” and one rated it as a “sell.” The mean price target for Tallgrass Energy is $25.4, which implies an upside potential of 5% from its current price. The above graph shows analysts’ recommendations and the mean price target for Tallgrass Energy for 12 months.

Tallgrass Energy is trading above its 200-day moving average but below its 50-day moving average. Its 200-day average may act as a support for the stock in the near term.

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