An energy stock with a 12.6% yield

Whiting is technically a REIT, which means it must pay huge dividends to keep its favorable tax status.

By InvestorPlace May 14, 2010 12:33PM

There's a lot of uncertainty in the oil industry right now as the Gulf of Mexico oil disaster continues to wreak political, environmental and economic havoc. BP (BP) has seen its stock dive 18% in the last month, and the rest of the sector has been fighting against the fallout as well.

 

But not all energy stocks are a bust. There's one oil stock that is up over 11% in the last 30 days -- and on top of this share appreciation, it boasts a stunning dividend yield of 12.6%.

 

That high dividend yield stock is the Whiting USA Trust (WHX). The company is technically classified as a real estate investment trust (REIT), since it is in charge of massive swaths of land as a subsidiary of parent company Whiting Petroleum (WLL).

 

Whiting Petroleum is an oil and gas stock that operates in the Rocky Mountains, Midwest and Gulf Coast -- and due to its extensive exploration efforts, it's a tremendous landowner.

Related: 7 low-risk dividend stocks with high yields

That's where the Whiting USA trust comes in. This subsidiary is basically just a way to hold all that land with minimal tax impact to Whiting Petroleum. It's apparently cheaper to pay WHX shareholders a high dividend yield than to keep that land under the WLL umbrella -- which is fine by those investors who own the Whiting USA trust. By law, REITs are required to distribute 90% of their income into the hands of the investors, and dividends are the easiest way to do that.

 

There are a host of small cap stocks with high dividend yield, but many of the stocks are in the financial sector. But WHX is a real diamond in the rough because it allows investors to play the appreciation of crude oil and the strength of the energy sector.

 

One word of caution, however: This huge 12.6% dividend yield is an annualized rate based on previous payouts. The last disbursement was at the end of February, meaning the next quarterly payout should be forthcoming shortly. But as with any investment there are no guarantees on these yields -- stocks are raising dividend yields as a whole, but there's no guarantee these dividends will stay put for long.

 

Related Articles:

 

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

104
104 rated 1
252
252 rated 2
457
457 rated 3
639
639 rated 4
495
495 rated 5
538
538 rated 6
704
704 rated 7
503
503 rated 8
350
350 rated 9
140
140 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
EOGEOG RESOURCES Inc10
TAT&T Inc9
COPCONOCOPHILLIPS9
DVNDEVON ENERGY CORPORATION9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.