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Linn Energy LLC (LINE), BreitBurn Energy Partners L.P. (BBEP): These Natural Gas MLPs Deserve Your Attention

3) BreitBurn Energy Partners L.P. (NASDAQ:BBEP) – This is another oil and natural gas MLP, but unlike Linn Energy, BreitBurn Energy Partners L.P. (NASDAQ:BBEP) is more heavily focused on oil than natural gas. Reserves for BreitBurn Energy Partners L.P. (NASDAQ:BBEP) break down like this: 53% crude oil and 47% natural gas. The states of Michigan and Wyoming contain the majority of BreitBurn Energy Partners L.P. (NASDAQ:BBEP)’s reserves.

Juicy dividends

One of the most attractive features of any master limited partnership, or a company created with the sole purpose of owning one, is the massive dividend yield. Investing in a company that receives tax benefits in exchange for having to pay practically all earnings to shareholders doesn’t sound too bad to me. The payout ratio is almost always near 100%, but the returns are sky high. Here’s how the dividends (or distributions in the case of BreitBurn Energy Partners L.P. (NASDAQ:BBEP) and LNCO) of these three companies compare:

First Dividend: 5/15/06 11/2/2012 2/14/07
Quarters Missed Since First: None None 4
Ever Lowered the Dividend? No No Yes
Current Dividend Yield: 8.7% 7.9% 10.6%

From where I’m standing, the dividend of Linn Energy is the clear cut winner here. Although its yield comes in second to Breitburn, it strikes me as the superior dividend for a few reasons. LINE has been paying a dividend longer, has never lowered it, and has never missed a quarter paying. Those are symbols of strength I like seeing in a dividend.

Final foolish thought

Master limited partnerships are an excellent form of investment for income seeking individuals. Here we have Linn Co, whose sole business activity is owning approximately 15% of Line Energy, selling for a price equal to 16.45% of LINE’s market cap. I see no reason to buy LNCO when it is trading at a valuation that is relatively high to its stake in LINE. Then there’s Breitburn Energy Partners yielding a scorching 10.6%. However, the dividend history of Breitburn is, in my eyes, inferior to that of Linn Energy. All of these companies appear fairly attractive at current levels, however if I had to pick one I’d go with LINE.

Fool blogger Ryan Palmer has no positions in any of the stocks mentioned. The Motley Fool recommends shares of BreitBurn Energy Partners L.P. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article These Natural Gas MLPs Deserve Your Attention originally appeared on is written by Ryan Palmer.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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