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The benefits of investing in pipeline stocks are similar to those of investing in a utility (electric or natural gas provider); utilities generally generate stable cash flows over a long period of time. Once a pipeline company is up and running the operators enjoy stable cash flows from long-term contracts. Due to economic uncertainty and extremely volatile markets, more investors are moving away from speculating and gravitating toward income generating investments. Another strong factor favouring income generating investments is that many baby boomers are retiring, and when they retire they tend to gravitate towards investments that provide a steady flow of cash as opposed to getting involved with speculative investments. In coming up with this list we looked for the following factors

1) A dividend payment history of 5 or more years, or 3 years or more of increasing the yearly dividend.

2) A market cap of $3 billion or higher. Large cap stocks are generally more stable than their small cap counterparts.

3) Operating cash flow (OCF) of $100 million or more. OCF is generally a better metric than earnings per share because a company can show positive net earnings and still not be able to properly service its debt; the cash flow is what pays the bills.

4) A yield of 4% or higher.

If a company did not meet the 1st criterion, then the only way it could get on this list would be if insiders purchased shares recently as is the case with Western Gas Partners (NYSE:WES) and if operating income increased for 3 years in a row. Operating income in WES has been increasing very nicely over the past 3 years; in 2008 it was $69.7 million, in 2009 it jumped almost 100% to $128.1 million and in 2010 it jumped another $23million to $151 million. In addition, Credit Suisse upgraded Western Gas, citing low risk visible growth. Price target raised to $42 from $40.

The two champs on this list are Buckeye Partners (NYSE:BPL) and Kinder Morgan Energy Partners (NYSE:KMP); both have long histories of increasing their dividends; BPL and KMR experienced consecutive dividend increases for roughly 15 and 14 years respectively. We also listed the EV value of each company. EV value is a combination of the market cap, debt, minority interests, preferred shares less total cash and cash equivalents. This provides a better picture because it is a more accurate representation of a company’s value as opposed to simply looking at the Market cap.

Stock

Dividend

Market Cap

Forward PE

Price/ book

Total Cash

Operating margins

Revenue

Operating

Cash flow

BPL

6.4

5.82B

17.8

2.49

16M

7.3

4.46B

178.43

ETP

8.3

9.1B

17.3

1.82

139M

18.69

6.4B

1.13B

EEP

7.00

8.2B

18.9

2.3

443

5.75

9.2B

618M

WES

4.4

3.3B

20

2.2

251M

28

610M

262M

KMP

6.10

25B

38

3.38

277

20

8.13B

2.87B

Buckeye Partners LP (BPL)

It has a market cap of $ 5.82 billion and enterprise value of $ 8.5 billion. The total cash it has amounts to $0.17 per share. BPL has a levered free cash flow of -$63 million and a price/sales value of 1.31. Out of a possible 5 stars we would assign this stock a 4 star rating. .

· Short percentage of float 1.6

· Percentage held by institutions 24

· Percentage held by Insiders 11.88

· ROE 5.6

· Qtrly Earnings Growth (yoy) N/A

· Total debt 2.75B

· 200 day moving average $ 21.20

· Book value $25.20

· Dividend yield 5 year Average 7.60

· Dividend rate $4.03

· Payout ratio 209

· Dividend growth rate 5 year average 5.88

· Consecutive dividend increases 15 years

· Paying dividends since 1990

· Debt/equity ratio N/A

· Total return last 3 years 171

· Total return last 5 years 79

Energy Transfer Partners LP (NYSE:ETP)

It has a market cap of $ 9.1 billion and enterprise value of $ 17 billion. The total cash it has amounts to $0.67 per share. ETP has a levered free cash flow of -$309 million and a price/sales value of 1.4

· Short percentage of float 3.10

· Percentage held by institutions 23

· Percentage held by Insiders 26

· ROE 13.4

· Qtrly Earnings Growth (yoy) -37.80%

· Total debt $8B

· 200 day moving average $ 45.43

· Book value $23.75

· Dividend yield 5 year Average 8.7

· Dividend rate $ 3.58

· Payout ratio 168

· Dividend growth rate 5 year average 7.56

· Consecutive dividend increases 0 years

· Paying dividends since 1996

· Debt/equity ratio N/A

· Total return last 3 years 98

· Total return last 5 years 14

Enbridge Energy Partners (NYSE:EEP)

It has a market cap of $ 8.2 billion and enterprise value of $ 13.36 billion. The total cash it has amounts to $1.62 per share. EEP has a levered free cash flow of -$420 million and a price/sales value of 0.89

Insider action: On the 17th of Nov., Vice President Janet, Coy purchased 5000 shares at a cost of $30.12 for a total outlay of $15,058.00. John Loiacono purchased 1000 shares at a cost of $30.10 a share for $30,100.

· Short percentage of float 0.9

· Percentage held by institutions 29

· Percentage held by Insiders 0.05

· ROE 10.23

· Qtrly Earnings Growth (yoy) N/A

· Total debt $1.62B

· 200 day moving average $ 29.16

· Book value $13.03

· Dividend yield 5 year Average 9.00

· Dividend rate $ 2.09

· Payout ratio 212

· Dividend growth rate 5 year average 2.5%

· Consecutive dividend increases 4 years

· Paying dividends since 1992

· Debt/equity ratio N/A

· Total return last 3 years 203

· Total return last 5 years 60

Western Gas Partners LP (WES)

It has a market cap of $ 3.3 billion and enterprise value of $ 3.7 billion. The total cash it has amounts to $2.79 per share. WES has a levered free cash flow of $161 million and a price/sales value of 5.37

Insider action: Donald Sinclair purchased 2,789 shares at $35.86 on the 23rd of September for roughly $100K. On the same day Director J. Rea purchased 2,091 shares at $35.86 a share for roughly 75K.

· Short percentage of float 1.9

· Percentage held by institutions 59

· Percentage held by Insiders 22

· ROE 12.27

· Qtrly Earnings Growth (yoy) 20.10%

· Total debt $669M

· 200 day moving average $ 35.23

· Book value $16.55

· Dividend yield 5 year Average N/A

· Dividend rate $ 1.60

· Payout ratio 93

· Dividend growth rate 3 year average 65.4

· Consecutive dividend increases 2 years

· Paying dividends since 2008

· Debt/equity ratio N/A

· Total return last 3 years 242

· Total return last 5 years N/A

Kinder Morgan Energy Partners LP (KMP)

It has a market cap of $ 25 billion and enterprise value of $ 38 billion. The total cash it has amounts to $0.83 per share. KMP has a levered free cash flow of $265 million and a price/sales value of 3.07. Out of a possible 5 stars I would assign KMR 4 stars.

Kinder Morgan recently announced its preliminary 2012 projections for Kinder Morgan, Inc. (NYSE:KMI), Kinder Morgan Energy Partners, L.P. (KMP) and Kinder Morgan Management, LLC (NYSE:KMR). KMI expects to declare dividends of $1.35 per share for 2012. This represents a 16.4 percent increase over KMI’s 2011 budget target of $1.16 per share and a 13.4 percent increase over the 2011 dividend per share on a declared basis, which is expected to be $1.19. The 2011 per share amounts are presented as if KMI were publicly traded for all of 2011. Note that while KMI previously presented dividends per share on a paid basis, they are now being presented on a declared basis to be consistent with KMP. On a paid basis, KMI’s 2012 expected dividend per share would be $1.29, which is 11.2 percent above the 2011 budgeted amount. The growth at KMI is being driven by KMP, which currently accounts for approximately 98 percent of the distributions that KMI receives.

· Short ratio 1.9

· Percentage held by institutions 7

· Percentage held by Insiders 18

· ROE 15.97

· Qtrly Earnings Growth (yoy) -33

· Total debt $13.62B

· 200 day moving average $ 71.90

· Book value $22.00

· Dividend yield 5 year Average 7.10

· Dividend rate $4.58

· Payout ratio 93

· Dividend growth rate 5 year average 7.31

· Consecutive dividend increases 14 years

· Paying dividends since 1992

· Debt/equity ratio N/A

· Total return last 3 years 93

· Total return last 5 years 97

Disclaimer: Do not treat this as a buying list. It is very important that you check the finer details in each of the mentioned plays before investing any capital in them. Some investors are happy with taking enormous amounts of risks, while others are bothered by the slightest degree risk; it is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat- emptor applies-let the buyer beware.

Source: 5 Pipeline Stocks With Superb Yields (Part I)