Viper Energy Partners cut at KeyBanc as 'inferior yield vehicle'
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Viper Energy Partners (NASDAQ:VNOM) -2.7% in Wednesday's trading as KeyBanc downgraded the partnership to Sector Weight from Overweight as a "less compelling investment vehicle, given the toggle between repurchases and distributions that continues to prioritize repurchases."
For years, Viper's (VNOM) value proposition for investors was "a healthy variable yield reflecting distributable cash flow from mostly unhedged production," but this has changed, KeyBanc's Tim Rezvan wrote.
Even as Diamondback's (FANG) backing is worthy of a premium valuation, "we don't see the appeal to yield-focused investors... simply put, a ~5% yield makes VNOM units an inferior yield vehicle," not competitive for investors who can find 8%-11% yields with other minerals companies.
Earlier this week, Viper Energy (VNOM) reported better than expected Q1 earnings.
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SA analysis: Good Growth And Fair Valuation Make This A Choice For Dividend Investors
Stock price return: 6% loss YTD, 11% loss in the past 12 months