New C-Corp Yields 8%, 5 Straight Hikes, Insiders Buying, Estimates Rising, Record Earnings

If you've ever owned a royalty LP, you may have encountered the problem of royalties based on fixed assets, which wind down over time, as does the royalty income stream. The yield is 7.8%, management has raised the payout five straight quarters, with more hikes on the way. It has received multiple upward earning estimate revisions over the past month. Insiders have been buying - the price is 16.8% below consensus price target. They'll convert to a C-Corp in Sept. before the next distribution - no K-1 for future distributions.

Kimbell Royalty Partners LP (KRP) is a royalty LP with a big difference - it's actively managed, meaning that it can grow its interests through acquisitions and dropdowns. KRP's management has actively grown its interests via acquisitions and organic growth since its February 2017 IPO. Production grew 19% and revenue grew 44%, as of 3/31/18. Based upon the Q1 '18 DCF figure of $0.42/unit, this 20% rise implies DCF of ~$0.50/unit, which would translate into a ~9% yield, since KRP pays out ~100% of its cash available for distribution:

Source: Seeking Alpha

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