What Hi-Crush Partners LP (NYSE:HCLP) offers investors is a direct play on the fracking technique. If fracking gets a clean bill of health, Hi-Crush Partners LP (NYSE:HCLP)’s business will continue to expand. If fracking is shut down, so, too, is Hi-Crush Partners LP (NYSE:HCLP). Investors willing to bet that technological advances win out should take a look at Hi-Crush Partners LP (NYSE:HCLP). Note, that it recently bought a competitor, D&I Silica, so it not only offers a large yield, but it’s growing its business, too.
A Lower Risk Profile
Kinder Morgan Energy Partners LP (NYSE:KMP) is one of the largest oil and gas infrastructure limited partnerships in the country. It basically takes the oil and gas from where it’s drilled to where it’s needed. That’s a toll taker business with a lot less risk than either drilling or selling frac sand. If Kinder’s pipelines are being used, it’s getting paid.
Clearly, if fracking stops the flow of oil and natural gas slows down. That would hurt Kinder’s business. However, it has such a massive scale, that it would be able to regroup easily enough. Like Hi-Crush Partners LP (NYSE:HCLP), Kinder Morgan is a limited partnership. Its yield is about 6.1%. Unlike Hi-Crush, Kinder has been around for a long time and has an impressive history of regular dividend increases. In 2003 it was paying $2.58 per unit annually, last year it paid $4.85.
Kinder’s yield is higher than similarly situated Enterprise Products Partners (4.3% yield) because it has a more complex corporate structure, including a General Partner (GP), two LPs, and a share class that pays its distribution in units instead of cash so it can be owned in a retirement account. Investors should take advantage of that discount and pick up the extra yield. And, for those looking to buy Kinder in an IRA, consider the Kinder Morgan Management version of the company.
Rough Start
Fracking has gotten off to a rough start. That’s to be expected of new technology. However, if the technique passes muster with the U.S. government, Ultra Petroleum, Hi-Crush Partners, and Kinder Morgan would all see their fortunes improve. The highest risk and most direct plays are Ultra and Hi-Crush.
The article U.S. Energy Department Says Fracking Not A Problem originally appeared on Fool.com and is written by Reuben Brewer.
Reuben Brewer has positions in Enterprise Products Partners and Kinder Morgan Energy Partners. The Motley Fool recommends Ultra Petroleum. The Motley Fool owns shares of HI-CRUSH PARTNERS LP (NYSE:HCLP) UNIT LTD PARTNER INTS and Ultra Petroleum and has the following options: long January 2014 $30 calls on Ultra Petroleum, long January 2014 $40 calls on Ultra Petroleum, and long January 2014 $50 calls on Ultra Petroleum. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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