In Greek mythology, Atlas was the Titan who held up the world. He was also the Titan of astrology and navigation. As investors, we need that same Titan strength in our portfolio to help us navigate through our uncertain world.
The best place to find strength for today's uncertain investing landscape is to add a rock-solid dividend-paying stock. It just so happens that a company by the name of Atlas Energy, L.P. (NYSE:ATLS) is one of those rock-solid dividend-paying stocks. The problem is that its affiliates, Atlas Resource Partners, L.P. (NYSE:ARP) and Atlas Pipeline Partners, L.P. (NYSE:APL), also pay world-beating dividends. So, that raises the question: When choosing between the three, which dividend titan should investors buy?
The strength of 12,000 wells
Atlas Resource Partners is a master limited partnership that owns an interest in 12,000 producing oil and gas wells. The company has about 1.4 trillion cubic feet equivalent of reserves. For a rough idea of how much gas that is, 1 trillion cubic feet of natural gas can fuel about 1 million households for 15 years.
Atlas Resource Partners' strength lies in its ability to buy low-cost, long-lived oil and gas assets and operate them for maximum cash flow. Further, because of its MLP structure, the company pays out virtually all of its cash flow to investors. At current prices that works out to be a 10.5% yield. That's a rock-solid yield as Atlas Resource Partners hedges 80%-100% of its production for at least three years in advance. Because of this, Atlas Resource Partners is the dividend titan that investors seeking oil and gas-fueled income should buy.
Spanning the earth
Atlas Pipeline Partners, on the other hand, owns pipelines and processing plants. Overall, the company owns or operates about 11,200 miles of pipelines, which if stretched end to end would nearly reach halfway around the globe. However, its assets are concentrated in the Eagle Ford Shale, Permian Basin, Mississippi Lime, and Woodford Shale areas.
Thanks to smart deal making as well as solid organic growth, Atlas Pipeline Partners is getting stronger every day. That's evidenced by the fact that the company's contracts are increasingly becoming fixed fee as opposed to being exposed to commodity price volatility. While just 43% of the company's contracts are currently fixed fee, that is up from 33% before its last acquisition. That's still solid enough that Atlas Pipeline Partners' 7.5% yield looks to be safe for the next few years. That makes it a strong income candidate for investors seeking to invest in the midstream industry's growth.
Two strong legs to hold up the world
Finally, we come to Atlas Energy, which combines the strength of the two partnerships as it owns a 2% general partner interest in both companies. In addition to that, Atlas Energy owns 37% of Atlas Resource Partners' units as well as 6% of Atlas Pipeline Partners' units. This dual approach means it receives income from the units it owns as well as the incentive distribution rights. So, while Atlas Energy's current distribution has it yielding 4%, that distribution will grow faster because of the incentive distribution rights. That's why Atlas Energy sees its distribution growing 50% in 2014.
While its current yield is lower, in my opinion, Atlas Energy is the company investors will want to own in order to get exposure to this family of dividend titans. Unless an investors is seeking a higher initial yield, Atlas Energy offers more diversification as well as faster income growth. That's a solid combination for investors seeking rock-solid income over the long term.
Fool contributor Matt DiLallo has no position in any stocks mentioned, and neither does The Motley Fool. 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.