Its big 2012 purchase was Heritage Propane. Management believes that it has a 15% market share of the propane market after the merger. While the top three players control about 30% of the market, the rest are smaller participants. This makes them ripe for acquisition by the industry’s largest companies.
On that score, AmeriGas Partners, L.P. (NYSE:APU) has made over 160 acquisitions since 1982. With its scale, it is well positioned to be a key industry consolidator. It offers a 7.2% yield, making it appealing for most investors.
AmeriGas Partners, L.P. (NYSE:APU) is the largest propane distributor, Suburban is the third largest. Number two is Ferrellgas Partners, L.P. (NYSE:FGP). The company serves around a million customers across all 50 states. The partnership has an over 10% dividend yield. Only aggressive investors should consider Ferrellgas Partners, L.P. (NYSE:FGP).
The problem is that the partnership often pays out more to unit holders than industry watchers believe it is sustainably capable of. So, there is a constant fear that the disbursement will be cut. While the distribution hasn’t grown, it hasn’t been cut either. So, for ten years Ferrellgas Partners, L.P. (NYSE:FGP) has been paying an annual distribution of $2 per unit despite what anyone says it can or can’t pay.
More aggressive investors willing to bet the company maintains its static distribution through thick and thin should take a look at this hefty yielding partnership. Don’t look here for distribution growth, however.
A Common Problem
The big issue facing all of these companies is a shrinking customer base. That’s a big long-term issue, but for large industry consolidators, any impact is likely years away. That makes these high yielders worth a look for income starved investors.
The article Propane Picks: The Other Fossil Fuel originally appeared on Fool.com is written by Reuben Brewer.
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