Seeking Alpha
, DividendLab (102 clicks)
Invest, Manage risk, Communicate, Educate yourself, Make profits. It's DividendLab
Profile| Send Message|
( followers)  

Breitburn Energy Partners L.P. (BBEP) offers an enticing 10.2% dividend yield to retirees. The upstream master limited partnership (MLP) generates revenues via natural gas and oil production. I would like to highlight 3 reasons why this MLP has its financials in order to pay out reliable dividends. The 10.2% yield can't be ignored by retirees in the world of a 2.61% 30 Year Treasury Bond yield.

(click to enlarge)BBEP Total Return Price Chart

BBEP Total Return Price data by YCharts

An upstream midstream MLP differs drastically from a midstream MLP. A midstream MLP, Enterprise Products Partners L.P. (EPD) for example, operates a toll booth business model. A midstream MLP charges a fee for hydrocarbon storage, pipe line fees, and processing fees. The midstream MLP fees are independent of oil, natural gas, and natural gas liquid prices.

Enterprise Products Partners L.P. is the premiere midstream MLP. The MLP is well respected in terms of its assets and management talent. The returns have been nothing slight of spectacular per the below chart.

(click to enlarge)EPD Total Return Price Chart

EPD Total Return Price data by YCharts

I believe high income, via cash flow through securities, is possible if the right securities are purchased at ideal prices. The below table highlights upstream and midstream total price returns. The hedges provide comfort to shareholders that the dividends are backed by hedges and swaps.

2012 - 2014 Natural Gas and Oil Production Hedges

79% of Breitburn Energy Partners 's 2012 oil production is hedged at $101 per barrel. 72% of the natural gas is hedged at $7.12 per mmbtu.

74% of Breitburn Energy Partners 's 2013 oil production is hedged at $92.05 per barrel. 74% of the natural gas is hedged at $5.96 per mmbtu.

74% of Breitburn Energy Partners 's 2014's oil production is hedged at $94.36. 66% of the

The Breitburn management team has effectively employed hedges and swaps to guarantee specific payout distributions to unit holders.

Substitute Upstream LLC

Linn Energy, LLC (LINE) is an upstream LLC. The entity is taxed as a MLP, but is a LLC due to not possessing a general partner. Linn Energy has increased from $35 to $40 in the past month. The current yield is 7.2% per year. I would rather own the 10.2% yield via the Breitburn Energy Partner position.

Action

I recommend retirees consider Breitburn Energy Partners as a high income, 10.2% annual dividend yield MLP. Retirees need income, and Breitburn Energy Partners provides a consistent and reliable income stream.

(click to enlarge)EPD Total Return Price Chart

EPD Total Return Price data by YCharts

Management has a proven and reputable record of hedging oil and natural gas production. The 10.2% yield is significant in light of July 19th's oil increase to $92 per barrel. The 10.2% yield is compelling and worthwhile in a retirement account.

The distribution has increased for 8 consecutive quarters and is likely to increase in future quarters based upon the hedged positions.

Source: 10.20% Proven Oil Dividend Yield For Retirees