AmeriGas: Big, Safe And 8.2% Yield

AmeriGas Partners (APU) is a master limited partnership that offers a big, safe, 8.2% yield. It has a low beta, low volatility, and exceptionally high returns on its invested capital. It is currently trading an attractive price. And even though AmeriGas operates in an industry (propane sales) with downward long-term price pressure, its big distribution payments are still very safe for many years to come, especially relative to other big yield opportunities. AmeriGas is a standout “widows and orphans” investment.

About AmeriGas
AmeriGas sells propane to over 2 million customers across all 50 states through its approximately 2,000 distribution locations. If you don’t know, propane is a by-product of natural gas processing and petroleum refining. It is used for home heating, space heating, water heating, cooking, grilling, and motor fuel, to name a few. The company has been around since the 1950’s, and it is currently the largest marketer of propane in the United States.

AmeriGas by the Numbers
AmeriGas currently pays its unitholders $0.94 per quarter which amounts to an 8.2% yield. And as the following chart shows, it has a long history of increasing its distribution payments.

AmeriGas also offer attractive diversification benefits and lower volatility. For example, its beta is only around 0.2 which means it is less sensitive to systemic market-wide risks than other typical investments. It also means AmeriGas can offer very important diversification benefits to risk averse investment portfolios. Additionally, AmeriGas is less volatile than other big yield investments. For example, we compared the daily and monthly volatility of AmeriGas to other big yield investments over the last year-to-date, 1-year, 3-year and 5-year periods, and found AmeriGas to exhibit significantly less absolute volatility (this is different from “beta” because it’s absolute volatility instead of volatility relative to the overall market as measured by beta).  Our analysis included over 200 securities with dividends greater than 5%, market caps greater than $500 million, and revenues greater than $100 million. For your reference, here is an abridged view of some of the most and least volatile big yield securities.

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Disclosure: None.

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