Wunderlich Securities: Tortoise North American Suitable For Fixed Income Investors Seeking Stable Distribution

Analyst Elizabeth C Malone of Wunderlich Securities Inc reiterates her “buy” rating on Tortoise North American Energy Corp TYN. The target price for TYN has been raised from $26 to $27. Wunderlich Securities says, “TYN guided $0.37 DPS for 3Q10 and 4Q10, but did not commit to distribution growth thereafter. We reiterate our distribution estimate of $1.48 in 2010 and raise our 2011 distribution estimate from $1.48 to $1.57. We estimate DCF coverage to be 1.04x in 2010 and 1.06x in 2011. We estimate increased distributions of $0.01 to $0.38/quarter in 2011. DCF/unit is expected to be $1.54 and $1.67 in 2010 and 2011, respectively. Our DCF/unit estimates imply 0.6% and 8.4% DCF/unit year-over-year growth in 2010 and 2011, respectively.” “A discounted distribution model at a 10% discount rate, a long-term growth rate of 4%, and the current annualized distribution per share (DPS) of $0.54 ($2.22/annum) yields a ~$24 per share value. An expected net asset value per share at the end of 3Q11 (FY: Nov), at a 1.1x multiple yields a ~$28 value. The blend of these two methods equates to our rounded, blended $27 per share target, implying 15.4% total return potential,” the analyst mentions. “Unlike direct investments in MLPs, an investment in TYG does not produce unrelated business taxable income in tax-exempt accounts and produces a Form 1099 rather than multiple schedule K-1s. We view TYG as suitable for fixed income investors seeking a stable distribution,” Wunderlich Securities adds. More Analyst Ratings here.