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Last year prices for natural gas liquids fell even faster than oil prices did. Hard as that may be to believe. Which is why the price for shares of Targa Resources (TRGP) are down 23.16% for the last twelve months

This year natural gas liquids have recovered faster than oil prices. Which is why the shares of this company, which runs a network of pipelines and storage facilities heavy on the transport of natural gas liquids, are up 62.66% for 2016 through September 2.

From here, on the basis of the company’s last quarterly numbers, the price gains look modest in the next quarter or two. Shares that traded at $43.97 today could hit a target price of $48 or so, I calculate as the price for natural gas liquids and the volumes flowing through Targa’s pipelines stabilize. But the shares do pay a dividend yield of 8.34% and that looks relatively safe over this transition period.

That dividend is why I put master limited partner Targa Resources Partners (NGLS) in my Jubak Picks and Dividend portfolios. And it’s why I’m keeping Targa Resources, the general partner successor to that master limited partnership, in those two portfolios with a target price of $48 by the end of 2016.

(General partner Targa Resources absorbed its master limited partnership in February 2016. The deal gave holders of the master limited partnership 0.62 shares of Targa Resources for each unit they owned of the master limited partnership. This kind of roll up of master limited partnerships has become relatively common in the sector as master limited partnership have seen a tight capital market erode some of their advantages as investment vehicles.)

Second quarter results didn’t remove all my worries about Targa. Volumes of natural gas liquids look likely to fall in the third quarter with the company forecasting that revenue shortfalls will be made up by fees paid by customers canceling their transportation contracts. This obviously isn’t sustainable over the long term and it’s one reason to suspect that dividend payouts won’t increase this year or next. The company estimates that it has hedged  approximately 70% of natural gas volumes, 60% of condensate volumes and 20% of natural gas liquid volumes, which does put some foundation under revenues.

Another damper on the share price over the next few months is the 13.6 million in warrants at $18.88 and the 6.5 million in warrants at $25.11 that are eligible for exercise in September. If a substantial number of holders decide to exercise their warrants that would add a substantial number of shares and spread cash flow over a larger universe of shares.

In other words I think Targa Resources is worth holding now for that dividend yield but I don’t think the next couple of months is a time to be buying lots of shares.

(Sorry that it’s taken me so long to change the symbol on this pick to TRGP from NGLS, but was easier to accomplish that change during the transition–scheduled for this weekend–to a new version of That’s been a lot of work–mostly for my developer. Hope you like the visible changes and that the invisible changes result in a measurably faster site.)