Welcome to the wild and wacky world of MLPs, Master Limited Partnerships. It’s an odd little niche in the investment universe. Completely unknown to most, eschewed by brokers, and the bane of the typical individual investor.
Those inhabiting this strange realm are either a) LONG term investors like me who live on the fat (tax deferred) distributions with no concern at all for share price fluctuations, or b) day-traders and shorting aficionados who attempt to manipulate the day to day share price by alternately shilling for and then against the stock. MLPs are generally thinly traded because insiders and long-termers like me own a large percentage.
MLPs are a horse of different color. They are covered by different laws than typical publicly traded corporations. They are generally in unglamorous, stable energy business infrastructure industry segments. P/E ratios and debt to equity ratios mean nothing in the MLP world. The coverage ratio from cashflow and debt to EBITDA ratio are the important metrics for MLPs. By law, MLPs must distribute most of their profits as limited partner distributions (quasi-dividends) and do not get taxed on those profits at the company level. Usually the cash distributions to the limited partners / unitholders (quasi shareholders) are tax deferred.
If your interest is day trading, welcome aboard; sit down, shut up, hold on, and good luck! If your interest is long term stable cash income, do yourself a favor and put in the effort to do the required research on MLPs; some are good, some aren’t. If you’re the typical mom & pop six-pack investor, be careful. Above all, understand your own goals, comfort zones, and quirks.
Disclaimer: I ain’t no lawyer or financial adviser. My opinion is probably worth what you paid for it. Caveat Emptor!
This is a market for traders, not long term investors. $2 dividends annually have been paid going on 19 consecutive years. The stock market is up 2% annually in the last 15. This is a thinly traded stock and the trader/short seller strategy is to scare the long term/retail investor into selling. Two major national suppliers have been absorbed, now there is only three and in reality, only two(APU and FGP). Margin improvement will continue as the cutthroat business has been trimmed to a more realistic competive environment whereby propane suppliers are now being paid for their work. Anyone can google propane autogas and note the propane market is healthy. Just last week, the Omaha, Nebraska area will acquire/convert 434 schoolbuses to propane; Pittsburgh, PA is adding to its taxicab fleet fueled by propane. And its getting colder. The balance sheet of FGP looks more than scary but one must realize its borrowings are well collateralized, borrowing costs trimmed(which assuages going concern issues) and has no long term debt maturities for several years. APU is also a bargain as ETP is selling its shares to raise capital.