In retirement, you want predictable income without much excitement. Investing in energy companies may not seem safe as commodity prices can fluctuate dramatically. While there is no utterly safe investment, the current US energy boom birthed master limited partnerships that have delivered steady returns for their investors. Here are three examples.

By the numbers...
The chart below illustrates some key income metrics for Plains All American Pipeline (NYSE:PAA), Vanguard Natural Resources (NASDAQ:VNR), and LINN Energy (NASDAQ:LINE). The first two categories are self-explanatory; the coverage ratio refers to the distribution coverage ratio, or the ratio of earnings to distributions. This should be at least 1.0, preferably higher, for the distribution to be sustainable.

Company      Yield (%)   Annual Distribution Growth (%)    Coverage Ratio

PAA                  4.6                              10                                      1.31

VNR                 8.1                                72                                      1.0

LINE                 9.2                                03                                      1.0

1. Plains anticipates a future coverage ratio of 1.1

2. Dividend growth has been under 4% since 2011

3. No dividend growth in 2012 and 2013

Each of these investment shows different ways of generating income.

Moving, storing and processing energy
Plains All American Pipeline basically moves and stores oil and natural gas. With the rising volume of domestically produced crude oil and gas, energy transportation looks like a steady business. According to its latest investor presentation, roughly 75% of Plains' business is fee-based and thus not subject to the volatility of energy prices.  

Plains' pipelines serve some of the most prolific oil producing regions of North America, including the Bakken, Eagle Ford, Permian Basin and Western Canada. Enhancing its ability to move product to where the best prices are, Plains also operates a combination of rail, barge and truck assets. These give Plains transportation flexibility beyond its pipelines, but Plains' primary business is pipelines and storage.

Plains anticipates earnings and distribution growth through acquisitions and internal growth. The company has multiple capital projects either recently completed or due for completion in the first quarter of 2014. These projects should drive higher revenues from the Eagle Ford and Permian Basin plays. The company also plans on delivering more heavy oil from Canada to Gulf Coast refineries.

Steady production, minimum outlay
Rather than move energy, Vanguard produces it. Specifically, Vanguard acquires mature, long life energy assets that require limited capital investment. Which is not to say Vanguard doesn't work to improve production from its holdings, it simply focuses on those assets requiring a minimum of capital outlay. That is, Vanguard makes money through a path of least financial resistance.

Unlike many of its peers, Vanguard actively acquires, rather than shuns, natural gas fields. In fact, natural gas makes up roughly 60% of Vanguard's total production. Perhaps it sees value in this commodity for the long haul. Not a bad thought considering the potential for natural gas exports from the US. For completeness, oil is roughly 25% of its production with the balance being natural gas liquids.

Vanguard has raised it distribution every year since 2007. The increase from 2013 to 2014 was an underwhelming 2 cents, from $2.47 per unit to $2.49. However, the company projects increased production of all commodities for 2014 with decreases in production costs. This should position the company well, not only regarding its coverage ratio, but for future distribution growth.

Riding out a storm
No question, 2013 was tough year for LINN Energy. Other analysts have summarized LINN's travails, but the year ended on a positive note with the closure of a much anticipated merger with Berry Petroleum. The company's latest earnings conference call had management sounding optimistic for 2014. 

LINN, and its corporate equivalent, LinnCo (NASDAQ:LNCO) produce oil and natural gas from mature, low risk fields much like Vanguard. Unlike Vanguard, LINN isn't afraid to spend money on exploration. Further, LINN focuses on oil production rather than natural gas. In fact, LINN management stated one of their goals for 2014 was to shift out of high decline natural gas assets into more profitable and lower decline oil assets.

What should you expect going forward from LINN? First, the Berry acquisition should immediately contribute to revenues and distributable cash flow. Berry's California assets, which produce heavier oil than West Texas Intermediate, could be a particularly valuable asset. LINN plans on reducing capital expenditures by $200 to 250 million but remains in the market for acquisitions should an opportunity arise. Significant increases in production, particularly oil, are also anticipated.

Final Foolish Thoughts
Trouble is brewing for America's retirees and baby boomers. Simply stated, they don't have enough
money for retirement. For those who have saved for their golden years, US energy production offers a way to maximize retirement income. Plains offers a modest yield, but superior yield growth, an investment for those without immediate income needs. Vanguard and Linn offer high yields with modest growth potential, better suited for those needing income now. All offer impressive track records of reliable payouts which should continue for years.

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Robert Zimmerman owns shares of Linn Energy, LLC and Vanguard Natural Resources. Robert Zimmerman has the following options: short July 2014 $35 puts on Linn Energy, LLC. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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