Wall Street's Buy List

Actions speak louder than words, as the old saying goes. So why does the media focus so much attention on what Wall Street says about companies, instead of what it does with them?

Luckily for Wall Street watchers, the Internet brings us MSN Money's list of which companies the institutions are buying. True, we should be as skeptical of Wall Street's actions as we are of its words. But when the 125,000-plus lay and professional investors on Motley Fool CAPS agree with Wall Street's opinions, it just might be time for some buying.

Here's the latest edition of Wall Street's Buy List, alongside our investors' opinions of the companies involved:

Companies are selected from the "Institutional Ownership Up Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price and CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
Wall Street just can't get enough of these stocks, and truth be told -- most of Fooldom seems just as enthralled. The stock CAPS members like best of all, though, is one you've quite likely never heard of (I know I had not): MarkWest Energy Partners.

Who are they, what do they do, and why do they deserve a full five-star rating from the CAPS community? That's what we aim to find out as we examine...

The bull case for MarkWest Energy Partners 
jeffgoz introduces us to the firm: "This is a gas pipeline utility play with some exposure to commodity oil/gas. Gas will only go high as the economy recovers, this will be a fruitfall investment when dollars from the government chase nat gas projects next year!!!"

Why should you want to own MarkWest? ayerskw believes that:

A confluence of circumstances ... has created a huge buying opportunity in a solid albeit boring business. The mid-stream pipelines are akin to a utility. ... the business has high capital/asset costs but the customers are locked in under contract and pay their tolls regardless of the unit price of the energy they want transported.

kdtrotter adds that:

No longer saddled with a general partner, MarkWest is one of very few MLPs [master limited partnerships] that pay out 100% of cash distributions to common unitholders. ... these cash distributions are magnified by the MLP's built-in shelter from income taxes. Recently, MarkWest shifted its focus from acquisition-driven growth to internal projects. Over the past two years, the partnership has completed or announced over $1 billion of organic growth projects, more than it has spent to acquire assets since its 2002 IPO. Importantly, this spending spreads across all business segments, showing that MarkWest can expand its asset base across all parts of its geographic footprint.

Sure, MarkWest isn't the fastest growing company on the planet, but so what? Wall Street expects only high single-digit earnings growth out of the company, but with a dividend that already beats the long-term returns of the S&P 500 by a factor of two, the need for growth diminishes considerably. You see, the 21.6% yield available today still looks pretty attractive. It's more than seven times the yield of rival Williams Companies (NYSE:WMB), and nearly 10 times what El Paso (NYSE:EP) pays. It's twice the usual payout at similar gas pipeline limited partnerships like Energy Transfer Partners (NYSE:ETP) or Kinder Morgan (NYSE:KMP).

Of course, there's still the question of whether MarkWest can afford to pay this dividend. The company had operating income of $138 million over the last four quarters (through 9/30/08). It paid out roughly $125 million in dividends during that time. But, it also paid out some $66 million in interest on its debt, which went from $590 million to $990 million over the course of the year.

Time to chime in
Personally, these numbers put me in serious doubt as to MarkWest's ability to maintain the dividend at its current lofty level -- in which case, the dividend could be cut, and I'd expect the stock price to follow.

But what do I know? I'm just a Fool. If you're reading this column, chances are you know MarkWest a whole lot better than I do, so you tell me: Is MarkWest as good a deal as it seems? Or, to mix a few metaphors, is Wall Street chasing a wild, golden-egg-laying goose with this one, and is this goose soon to be cooked? Click on over to CAPS, and tell us what you think.