A purer-play natural-gas MLP
Whereas Enterprise Products Partners L.P. (NYSE:EPD) and Kinder Morgan have diversified assets and operations, Energy Transfer Partners LP (NYSE:ETP) operates almost entirely in natural gas. Energy Transfer Partners LP (NYSE:ETP) currently has natural-gas operations that include approximately 47,000 miles of gathering and transportation pipelines, treating and processing assets, and storage facilities.
The company has racked up 46% growth in distributable cash flow during the first six months of the year, and the company is optimistic about its natural-gas projects going forward. These include a new plant in Texas capable of processing 200 million cubic feet per day that opened in the second quarter of this year.
Why these companies stand to benefit
Natural gas demand and usage are on the rise in the United States, which means the companies that have taken aggressive action now are in prime position to profit.
Consider that between October 2011 and September 2012, natural gas comprised 30% of the nation’s electricity. Coal made up 37% of the total. This stands in stark contrast to a decade prior, when natural gas accounted for just 18% of U.S. electricity.
And, finally, natural gas prices seem to be reacting as you’d expect. Recently, natural gas prices touched a five-week high at the New York Mercantile Exchange. If the combination of rising prices and increasing demand are sustained, natural gas is poised to become a permanent part of our national energy mix. These companies that have stepped in front of the trend will likely see their efforts rewarded.
Pumping distributions out to shareholders
At current prices, these three stocks provide their investors with hefty yields. Enterprise Products Partners L.P. (NYSE:EPD) and Kinder Morgan yield 4.5%, and 6.4%, respectively. Energy Transfer Partners LP (NYSE:ETP) does even better for its investors, with a nearly 7% distribution. And, due to their impressive growth strategies, particularly toward natural gas, each of these MLP’s should be able to increase their distributions for many years.
If you’re a strong believer in the increasing role natural gas is to play in our national energy solution, Energy Transfer Partners LP (NYSE:ETP) should be the focus of your research. If, on the other hand, you’d prefer more diversified oil and gas MLPs, Kinder Morgan and Enterprise Products Partners should be given preference. But, as a whole, natural gas is set to play a larger role in our domestic energy mix, which investors would be wise to take into consideration.
The article Why Investing in Natural Gas Should Pay off for These MLPs originally appeared on Fool.com is written by Robert Ciura.
Robert Ciura owns shares of Kinder Morgan Energy Partners LP. The Motley Fool recommends Enterprise Products Partners L.P..
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