Friday, June 26, 2009

Is Propane a Clean Fuel Play?

Or are people flocking to dividend stocks again?

I think it could be both and noticed propane stocks such as AmerGas Partners LP (APU), and Ferrellgas Partners LP (FGP) doing well today.

APU
is yielding 7.9% and FGP is yielding 12.3% at todays prices.

Both operate as Master Limited Limited Partnerships ( MLPs) and distribute the majority of profits to the unit holders rather than pay taxes.

AmeriGas Partners, L.P. (APU) Is the nation’s largest retail propane marketer, serving nearly 1.3 million customers from approximately 600 locations in 46 states.

Ferrellgas Partners LP (FGP) was founded in 1939, and is the largest provider of propane by branded propane tank exchange through its Blue Rhino brand. It serves approximately 1 million Customers in all 50 states, the District of Columbia, and Puerto Rico.

We can only speculate whether propane becomes a clean fuel for cars or not. These two companies already pay a fair distribution and the stocks look ready to move higher. If propane finds increase use as a motor vehicle fuel, so much the better.

APU chart

click charts for a larger view


FGP chart

I have a position in FGP.

By the way, MLPs have their own language; they call dividends distributions, and share holders are called Unit holders. MLP distributions are often treated differently than typical stock dividends. You may want to contact your accountant prior to purchasing Master Limited Partnerships.



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