Atlas Pipeline Partners: Excellent Source of High Income

I will just throw this one right out there: I think Atlas Pipeline Partners LP (APL) looks like an excellent source of high income, with some growth thrown in.

APL is in the natural gas pipeline business, where its many miles of pipeline gather natural gas from wells to be transported to processing locations, which is also the company’s business. The company gets gas from about 6,500 wells in the Appalachian region and collects and processes over 1.1 billion cf/day in its Mid Continent region (TX, OK, AR, KS).

APL is 64% owned by Atlas Energy (ATN), which provides 100% of APL’s Appalachian gas to transport and process. APL gets the gas for the life of the well contract and receives a fee of 16% of the market price of the gas they process. Atlas has plans to add over 1000 wells to the existing 6,500. In mid continent it appears that APL collects and processes gas for a variety of producing customers.

Atlas Pipeline Partners has shown very strong revenues, earnings and distributions over the last 5 years. As an income stock, the distribution has been increasing at a 13% rate. Current yield is 8.5% and the 2008 projected distributions of $3.80 put the yield for this year over 9%.

If gas prices rebound from their current funk (especially in relation to oil) earnings could really pop. I also like the fact this company has a $1.6 billion market cap, so is not as well followed. The stock price has been falling for about 6 months, probably in response to low natural gas prices.

Disclosure: I am adding APL to this blog’s 20 Stock Portfolio. I currently do not have a position in this stock, but I am trying to eyeball a bottom in the price to pick up a few shares.

Comments

[pickaroonwyo]

APL is a subsidiary of Atlas Energy, a large holder of Marcellus Shale leases.

[len811]

Wachovia and a couple of others are following the stock.
Looks like they have been borrowing more money and paying (relatively) less dividends in most recent history.