"Commodity stocks may not look like safe havens right now but one sector that that you should consider is master limited partnerships (MLPs) that hold pipeline assets throughout the United States," explains Glenn Rogers.
The contributing editor to Gordon Pape's Internet Wealth Builder looks at three favorite pipeline operations, each offering a high yield and capital appreciation potential. Here's his pipeline trio.
"One of the largest MKPs is Kinder Morgan Energy Partners (NYSE: KMP), which has increased payouts for 12 years in a row.
"That beats money market funds by a mile and the company is in very good shape no matter how much the energy markets gyrate.
"Kinder Morgan is one of the largest pipeline transporters and terminal operators in North America, and has extensive operations in Canada.
"The shares are not cheap on a P/E basis at 22. However, Kinder Morgan appears to be a money machine. In its third-quarter report, KMP said that quarterly distributable cash flow before non-recurring items was $281.9 million, up 23%. Distributable cash flow per unit was $1.09, up 14%.
"My second favorite is Boardwalk Partners (NYSE: BWP), which was a screaming buy when it dropped to $14 during the big sell-off in October. It has rebounded since but still looks relatively cheap at $21.52, well down from its 52-week high of $32.42. The shares currently yield 8.8%.
"Boardwalk is a limited partnership that is involved in the interstate transportation and storage of natural gas. Like Kinder Morgan, the company is performing well in this difficult environment.
"Third-quarter results showed net income of $73.6 million, up 84 % from a year ago. For the first nine months of the fiscal year, earnings were $226.4 million, a 46% increase $155.6 million in the comparable 2007 period. Operating revenue of $191.6 million for the quarter was ahead 42% from last year.
"The company recently received a $1 billion investment from its principal shareholders, the Lowes family which owns 70% of the outstanding shares. This will help ensure it meets its growth goals going forward.
"My final pick isn't an MLP but it has a large stake in one. The company is ONEOK Inc. (NYSE: OKE), which has a 47.7% position in ONEOK Partners (NYSE: OKS). It owns one of the premier natural gas liquids (NGL) systems in the U.S.
"It is also one of the largest natural gas distributors in the United States. ,Here again, the third-quarter financial results were very strong.
"OKE reported net income of $58 million (55c per share, fully diluted) compared with $13.9 million (13c per share), in the same period last year. OKE currently pays a quarterly dividend of 40c a share ($1.60 annually) for a yield of 5.95%.
"Investors could buy these three positions as a basket. Purchasing 100 shares of each would cost approximately $10,000 and provide an average yield of 7.6%."
