3 Unique MLPs For Your Income Watchlist

I'm always on the lookout for a great income stock to own. I've never been a bond guy, though I understand their place in investor's hearts. I just think we can do much better with equities that have a big yield that's likely to grow over time. Even though we're fishing at the boring end of the pond, I'd still prefer to invest in a company that's doing something unique.

By now, almost every investor is familiar with the large distributions from midstream master limited partnerships. Pipeline companies such as Enterprise Product Partners (NYSE: EPD  ) have rewarded investors with a steady, growing distribution. Enterprise's distribution is better than most, as it;s now grown for 34 straight quarters. The thing is, every investor already knows the midstream MLPs, so If you're bored with your current boring income providers, here are three unique companies to put on to your watchlist.

Fishing further upstream
All that oil and gas that flows through the pipes at Enterprise Products Partners has to come from somewhere. While most oil and gas wells are owned by traditional exploration and production companies, a growing number of mature wells are being snapped up by upstream MLPs such as BreitBurn Energy Partners (NASDAQ: BBEP  ) . 

The partnership has a high-quality asset base of predictable, long-lived production that's estimated  to have 18 years of reserve life left. Beyond that, revenue is not likely to dry up, as the company has several low-risk organic production growth opportunities and vast acquisition potential. That outlook leads the company to believe it can continue to grow its distribution to investors by about 5% each year. Add that to a current distribution of nearly 10%, and it's enough to make any income-focused investor salivate.

Building a solid foundation from sand
One of the reasons BreitBurn is able to acquire mature oil and gas properties is because most exploration and production companies are focusing capital to drill more expensive wells only possible by fracking. The thing with fracking is that it requires a whole lot of sand to get the job done.

If you'd rather piggyback on the shale boom, why not invest in sand producer Hi-Crush Partners (NYSE: HCLP  ) ? The company is a pure-play and low-cost supplier of sand proppant, which is used in the fracking process to keep the fractures open. The company has long-term, take-or-pay contracts that lock in its cash flow. That's enough to deliver more than a 10% yield for investors. 

Don't dig your own grave
Moving away from the energy sector for a moment, let's pause to contemplate our own mortality. Cemetery and funeral home owner StoneMor Partners (NYSE: STON  ) cashes in when you check out. Probably not the most pleasant thought in the world, but we all meet our end at some point. That means fairly steady business for StoneMor.

Now, I will say that the accounting here is a bit complex and might be more than the average investor is willing to put up with. That accounting has already caused quite a bit of back and forth between management and short sellers. If you don't mind digging into this one and holding on for what could be a volatile ride, then the distribution of more than 9% could be well worth your trouble.

My Foolish take
While I do own shares of StoneMor and a competitor to BreitBurn, I'm most intrigued by the potential of Hi-Crush Partners. That yield in excess of 10% is pretty tempting these days, given what most bonds are offering. It's a company I plan on watching closely and digging into a bit deeper to make sure its business is made of more than just sand.

The production of natural gas from hydraulic fracturing and horizontal drilling is flooding the North American market and resulting in record-low prices for natural gas. Enterprise Products Partners, with its superior integrated asset base, can profit from the massive bottlenecks in takeaway capacity by taking on large-scale projects. To help investors decide whether Enterprise Products Partners is a buy or a sell today, click here now to check out The Motley Fool's brand-new premium research report on the company.


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  • Report this Comment On March 03, 2013, at 7:00 PM, ferdiefor wrote:

    Garbage MLPs..... High yield, zero growth.

    Won't pay the higher medical bills I expect to rise over inflation rate over next decade or more.

  • Report this Comment On March 26, 2013, at 12:30 PM, IlluminatInvest wrote:

    HCLP is expected to grow earnings by 46% a year over the next 5 years, I think that might just barely outpace inflation.

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