Analyst Watch: Put Some Energy in Your Portfolio

U.S. stock index futures pointed to a positive open for Wall Street Wednesday after better-than-expected earnings from Apple that came after the bell Tuesday.

European shares were higher across the board with technology firms leading the gains in the wake of Apple's numbers. Asian indexes closed mixed, but mostly higher.

Here's what guests on today's Squawk on the Street are watching before the opening bell:

Joseph Keating, executive vice president, CIO and head of wealth management at Center State Bank, says the prospect for further gains in common stock prices ultimately comes down to owning solid companies with attractive valuations.

"The high quality, dividend paying companies with brand name products and consistent track records of paying dividends and of increasing those dividends — in which we invest — were the best place to ride out the correction and are likely the best place to hold common stock positions during the uncertain period ahead of us," he says.

The record on dividends this year is a hopeful sign the economy and the stock market are in a sustainable recovery, he continues. Within the higher yielding, more defensively positioned sector of dividend paying stocks, investments in energy infrastructure companies can generate a dividend/distribution yield in the 5-8 percent range, far in excess of the 2.1 percent yield on the S&P 500, Keating says.

"The current spread between the average MLP distribution yield to the yield on the ten-year Treasury is 375 bps versus an average of 322 bps," he says. "The utility sector is offering dividend yields 150 bps to 250 bps above the yield on the ten-year Treasury."

So which stocks does he like? He's pretty bullish on the energy sector.

"The midstream pipelines have a business model that is similar to a toll road and, therefore, enjoy more utility-like earnings based on continued consumption of energy, rather than on higher energy prices," Keating explains.

In particular, he suggests considering companies like:

Kinder Morgan Energy Partners
Enbridge Energy Partners Williams Partners

In natural gas transportation and distribution companies, he likes:

Enterprise Products Partners
Boardwalk Pipeline Partners
Energy Transfer Partners

Electric utility companies he likes are:

Consolidated Edison
Entergy Corp
FirstEnergy Corp.

And multi-service utility companies he suggests looking into are:

Scana Corp PG&E Corp

See more of what these and other analysts and money managers have to say, and get the latest financial news. Watch Squawk on the Street every weekday morning starting at 9 a.m. ET.


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