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Extremely mild winter weather, natural gas competition, volatile feedstock prices and rising transportation costs have made propane distribution a tough business.

A series of sector mergers, however, is rapidly shifting those economics in a positive direction.

AmeriGas Partners LP (NYSE: APU) is shaping up as a major beneficiary. Earlier this year the master limited partnership became the industry's biggest player by acquiring the assets of Heritage Propane. The Heritage deal stretched its network to more than 1,200 locations in 50 states serving 2 million-plus customers.

It also added a powerful partner in Heritage's former owner Energy Transfer Partners LP (NYSE: ETP), which now owns 32 percent of the partnership. Another 26 percent is owned by UGI Corp (NYSE: UGI), which remains the sole general partner.

That's a lot of will and financial way to keep AmeriGas raising quarterly distributions 5 percent a year going forward.

Fiscal 2012 third-quarter (ended Jun. 30) results also supported that goal, as management raised its full-year cash flow forecast to $620 million to $660 million ($6.68 to $7.11 per unit), despite seasonal weakness.

Winter demand remains pivotal for propane profits. But scale will benefit AmeriGas' results by increasing margin on gallons sold as well as from market-share expansion.

And there are still further opportunities for growth from acquisitions.

The result should be a sharp improvement in distribution coverage in fiscal 2013, which will include two full quarters with the Heritage assets. That in turn should push the unit price back toward 50, as worries about dividend safety fade. For 5 more worry-free, high-dividend stocks, see my free report.

Source: Can AmeriGas Partners LP Maintain Its Distribution Growth?