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<< Return to Part II

This is part III of the series. In part II we looked at 5 companies, two of which were Kinder Morgan Energy Partners LP (NYSE:KMP) and Plains All American Pipeline, LP (PAA)

MLPs combine the tax advantage of partnerships with the prospect of higher dividends and can be traded like stocks. Unlike corporations, MLPs are not subject to double taxation. In coming up with this list we looked for the following factors:

1) A dividend payment history of 4 or more years.

2) A market cap of $1 billion or higher. Large cap stocks are generally more stable than their small cap counterparts.

3) Operating cash flow (OCF) of $150 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. If this metric was not met as in the case of CQP, then the company had to have a positive levered free cash flow.

4) A Yield of 4% or higher.

In the part two we highlighted MLPs with positive levered free cash flows. Levered free cash flow is the amount of cash available to stock holders after interest payments on debt are made. A company with a small amount of debt will only have to spend a small amount of money on interest payments, which in turn means that there is more money to send to shareholders in the form of dividends and vice versa. Earnings can often be manipulated via accounting gimmicks, but it’s much harder to fake cash flow. As a result, many investors feel that free cash flow (FCF) provides a better picture of a company’s ability to generate cash. Negative FCF numbers do not necessarily bode badly for the company in question, for it could be a sign that a company is making large investments, which could lead to big payoffs in the future. In this instance, we do not need to highlight the MLPS as all of them have positive levered free cash flow rates. .

Stock

Dividend

Market Cap

Forward PE

EBITDA (ttm)6

Total Cash

Operating margins

Revenue

Operating

Cash flow

CQP

10.6

2.67B

12

191M

94M

52%

285M

21.82M

BBEP

9.65

1.06B

16.85

223M

4.78M

31%

366M

167M

NRP

7.8

2.95B

14.4

312M

150M

70%

356M

301M

MMP

4.93

7.32B

17.98

614M

198M

29

1.66B

534M

WES

4.10

3.46B

21

256M

2.79B

28.26

610M

262M

Cheniere Energy Partners L.P. (NYSEMKT:CQP)

Cheniere Energy Partners LP has enterprise value of $ 4.77 billion. The total cash it has amounts to $0.08 per share. CQP has a levered free cash flow of $27.6 million and a price/sales value of 9.30. Out of the 3 analysts following this stock, one has a buy, one rates it as neutral and the last one rates as a hold. The full list can be accessed here

Cheniere Energy Partners L P entered into two multi-billion dollar contracts, one with the BG Group this October valued at $8 billion supply 3.5 million tons per year of LNG from its Sabine Pass Liquefaction project. The second deal was signed with Spain’s gas Natural Fensoa for $9 billion to supply 3.5 million tons of LNG per year for 20 years with the option of extending it for another 10 years. CQP has been bleeding for years and these two deals should help instil some confidence in investors because it provides CQP with means to refinance and or pay off some of its existing debt which is coming due in May 2012.

· Short percentage of float 0.5%

· Percentage held by institutions 2.17%

· Percentage held by Insiders 7.3%

· ROE N/A

· Quarterly earnings Growth (yoy) N/A

· Total debt $2.19 B

· 200 day moving average $ 16.32

· Book value $-3.07

· Dividend yield 5 year Average N/A

· Dividend rate $1.71

· Payout ratio 293%

· Dividend growth rate 3 year average 0.00%

· Consecutive dividend increases 0 years

· Paying dividends since 2007

· Debt/equity ratio N/A

· Total return last 3 years 347%

· Total return last 5 years N/A

Breitburn Energy Partners L.P. (NASDAQ:BBEP)

Breitburn Energy Partners L.P. has enterprise value of $ 1.58 billion. The total cash it has amounts to $0.08 per share. BBEP has a levered free cash flow of $4.76 million and a price/sales value of 2.92. Out of the 19 analysts following BBEP, 5 rate it as an outperform and 6 rate it as a buy. The full list can be accessed here

A potential warning or negative development.

Beneficial owner QUICKSILVER RESOURCES INC sold over 8 million shares in November at $16.52 per share. They have been cutting back on their position since Jan 2011, but turned rather aggressive from June onwards. The full list of transactions can be accessed here .

· Short percentage of float 0.7%

· Percentage held by institutions 27%

· Percentage held by Insiders 29%

· ROE 5.21%

· Quarterly earnings Growth (yoy) N/A

· Total debt $516

· 200 day moving average $ 18.45

· Book value $23.52

· Dividend yield 5 year Average -0.36%

· Dividend rate $1.69

· Payout ratio 145%

· Dividend growth rate 3 year average 6.27%

· Consecutive dividend increases 1 years

· Paying dividends since 2007

· Debt/equity ratio N/A

· Total return last 3 years 174%

· Total return last 5 years 12.28%

Natural Resources Partners L.P. (NYSE:NRP)

Natural Resources Partners L.P has enterprise value of $ 3.62 billion. The total cash it has amounts to $1.42 per share. NRP has a levered free cash flow of $28 million and a price/sales value of 8.27. It has increased its dividend consistently for 7 years and insiders have a 47.89% stake in the company. Out of a possible 5 stars we would assign NRP 3.5 stars.

Insiders purchased 2000 shares in NRP from June- August at a price of 24.22-28.75 a share. Adena minerals LLC a beneficial owner purchased 1,669,231 shares; this was a non open market transaction. The full list of insider transactions can be accessed here.

· Short percentage of float 0.8%

· Percentage held by institutions 11%

· Percentage held by Insiders 47.89%

· ROE 14%

· Quarterly earnings Growth (yoy) N/A

· Total debt $817M

· 200 day moving average $ 29.19

· Book value $6.61

· Dividend yield 5 year Average 8.5%

· Dividend rate $2.17

· Payout ratio 119%

· Dividend growth rate 3 year average 6.27%

· Consecutive dividend increases 7 years

· Paying dividends since 2003

· Debt/equity ratio N/A

· Total return last 3 years 128%

· Total return last 5 years 46%

Magellan Midstream Partners L.P. (NYSE:MMP)

Magellan Midstream Partners LP has enterprise value of $ 9.27 billion. The total cash it has amounts to $1.76 per share. MMP has a levered free cash flow of $166 million and a price/sales value of 4.37. It has increased its dividend consistently for 9 years and has a very strong quarterly earnings growth (yoy) rate of 94%. We would assign MMP 3.5 stars out of a possible 5 starts.

· Short percentage of float 0.9%

· Percentage held by institutions 48.7%

· Percentage held by Insiders 0.32%

· ROE 26.4%

· Quarterly earnings Growth (yoy) 94%

· Total debt $2.15B

· 200 day moving average $ 60.30

· Book value $13.10

· Dividend yield 5 year Average 6.5%

· Dividend rate $3.09

· Payout ratio 89%

· Dividend growth rate 3 year average 6.41

· Consecutive dividend increases 9 years

· Paying dividends since 2001

· Debt/equity ratio N/A

· Total return last 3 years 164%

· Total return last 5 years 103%

Western Gas Partners L.P. (WES)

Western Gas Partners LP has enterprise value of $ 3.88 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. Dividend payments amounted to $94million so it should have no problem making dividend payments as the levered free cash flow is well in excess of these payments. It has been paying dividends for roughly 4 years but at the same time it has increased its dividends for 2 years in a row.

Insider action

Donald Sinclair purchased 2,789 shares at $35.86 on the 23rd of September for roughly $100K. On the same day Dir 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%

· Quarterly 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 244%

· Total return last 5 years N/A

Source: MLP Sizzlers, Part III

Additional disclosure: DisclaimerDo 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.