Cramer: 2 High-Yielders with Upside Potential
If there's a holy grail of investing, it's a stock that can advance sharply higher while also delivering a substantial yield. "That's nothing short of a beautiful combination of income and appreciation," Cramer said.
That kind of stock is always hard to find, but in a bull market where averages break out to new highs on almost a daily basis, it's next to impossible.
How can you figure out which stocks that pay big dividends still have room to run?
In situations like this one, pros such as Jim Cramer often turn to technical analysis to see what patterns in stock charts suggest. And with the help of top technician Toni Hansen, President and co-founder of Trading from Main Street, Cramer may have found not one but two stocks with both upside potential and bountiful yields.
Atlas Pipeline Partners
Atlas Pipeline Partners is an MLP that delivers natural gas across the so-called mid-continent. Turning attention to the charts, analyst Toni Hansen believes she's spotted something called a cup and handle pattern – a fairly reliable bullish pattern.
That's characterized by a big cup-shaped bottom, followed by a period of consolidation where a stock trades in a tight range that looks like a handle. After the stock breaks out from the handle, typically there's a substantial move to the upside.
Looking at the specific levels, Hanson noted that Atlas had been stuck under the $36 level for some time, but in the last two weeks, the stock broke out all the way to $38. Although Hansen thinks the stock might meet some resistance around $40, the high-end of its trading range over the last-two years, if it can clear that hurdle, she believes the next stop could be around $45, possibly followed by a move up to the $50 level.
And it's worth noting that although Hansen likes Atlas, she also acknowledges that it might take some time for that breakout to happen. However, she has no problem waiting because Atlas also generates a yield that greater than 6%.
Enbridge is also an MLP that moves natural gas and oil in both the US and Canada.
Turning attention to the weekly chart. Hansen believes that the momentum has shifted in favor of the bulls. She believes a turning point came when the stock made a W-shaped double bottom pattern. Since that time the stock has been consolidating, trading sideways on higher volume, which suggests to Hansen that there's more buying interest. In turn, she believes Enbridge Energy could be poised to breakout higher.
Looking at specific levels, Hansen is a buyer on a breakout above $30.30. The one issue Hansen sees here is that there is, potentially, a strong ceiling of resistance in the $33 to $34 range, where the stock peaked in 2011 and then again in 2012. However, if the stock breaks through that $33 to $34 ceiling, then she thinks the upside could be substantial.
And in the meantime, it's worth noting Enbridge Energy Partners is paying a 7.25% yield.
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Jim Cramer largely invests on fundamentals and the fundamentals for both stocks seem solid – in fact domestic energy is a theme that Cramer thinks will remain in the sweet spot for quite some time to come. And both Atlas and Enbridge appear well positioned to benefit from the abundance of new energy discovered in North America.
"You've got bountiful yields, and Hansen believes these two stocks also have terrific charts," said Cramer. "What more could you want?"
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