VNOM - Viper Energy Partners cut at KeyBanc as 'inferior yield vehicle'

2023-05-03 14:42:11 ET

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 .

More on Viper Energy Partners:

• See financial and valuation comparisons to sector peers
• 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

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