Propane is an afterthought in the energy industry, but one that still plays a pretty big role in this country. Although falling propane prices have recently been in the news, there's a big and largely stable U.S. market that's gotten lost in the headlines. In fact, this trio of high-yielding partnerships is holding up well and putting cash in your pocket.

What is propane?
Technically speaking, propane is a natural gas liquid. For the most part, it's a byproduct of the oil and gas exploration and refining process. But just because it's a byproduct doesn't mean it isn't useful. If you've ever fired up a gas grill, you've been a happy propane customer. But it can do much more than that. For example, propane is used for heating in remote locations and for transportation (when I was a kid, we even had a gas fired refrigerator in our summer cabin)

A propane use that will never go out of style. Source: Fluffball70, from Wikimedia Commons.

But domestically, demand for propane is slowly declining. Forklifts run on propane are being displaced by ones powered by batteries or, more recently, hydrogen fuel cells. And more and more people in once-remote locations are switching to alternative heating sources, like natural gas or electricity.

So, the number of propane customers in this country is shrinking, which is why propane distributors Ferrellgas Partners, L.P. (NYSE:FGP), Suburban Propane Partners (NYSE:SPH), and AmeriGas Partners, L.P. (NYSE:APU) have long worked to consolidate the still largely fragmented industry in their efforts to grow. And as for propane prices, these guys are middle men. So despite the volatile propane price of late, this trio actually prefers their product to be cheap.

Moreover, as limited partnerships, they are designed to pass income directly to shareholders. So as long as they can keep growing via acquisition, and low prices support demand, they should be able to keep milking this cash cow for unit holders. What follows is a quick run-down on each partnership.

The industry giant
AmeriGas is the country's largest propane distributor, with about two million customers across all 50 states. It has over 2,000 distribution locations. Although often volatile weather can have a big impact on demand, that hasn't stopped the company from an impressive string of dividend hikes. For example in 2015, the company raised its dividend for the 11th consecutive year.

As far as propane prices go, CEO Jerry Sheridan noted, "Lower commodity prices are good for our customers and for the industry as a whole." Why? Because it stops customers from switching to alternative fuel options. Even when prices have been uncommonly low, AmeriGas has continued to make acquisitions. It's bought out over 70 competitors over the last decade, something that should continue to keep its business growing over time.

The runner up
Ferrellgas has over 850 locations across all 50 states, with around a million customers. It's made over 200 acquisitions since 1986. Like AmeriGas, volumes sold are highly dependent on the vagaries of weather, but it's been pleased with lower propane prices because it improves the industry's long-term prospects. But there's a more important distinguishing factor here. Ferrellgas is expanding into new areas.

A 150 gallon propane storage tank used for heating. Source: Jessie Eastland, via Wikimedia Commons.

For example, it recently inked a deal to acquire Bridger Logistics, augmenting its growth in the oil and gas midstream space. It announced this diversification strategy in early 2014. Although propane is still the company's biggest business, it is basically using its stable propane business to shift into new markets. While that means it's no longer a pure play on propane, it might interest investors who prefer a little more diversification.

Unlike AmeriGas, Ferrellgas doesn't have a history of distribution hikes, but it has paid a steady annual distribution for over a decade.

Don't forget me!
Suburban Propane Partners has operations in 41 states, serves around a million customers, and has over 700 locations. To be fair, it's a toss-up between Ferrellgas and Suburban for No. 2 in the industry. In addition to propane, this partnership is also involved in fuel oil and marketing natural gas and electricity. That said, propane is easily its biggest business.

Suburban is still working to digest its 2012 purchase of Inergy's propane business. While it may seem odd that integration is still going on some three years after the purchase, the deal was a big one, essentially doubling Suburban's size. So a take-it-slow approach isn't the worst thing here, but the deal does show the importance of acquisitions in this industry, as it vaulted Suburban into the big leagues.

Like competitors, weather can be a drag on Suburban's results, specifically if a winter is warmer than expected. But even after a warm winter CEO Michael Stivala once noted that "sustained lower commodity prices have had a favorable impact on customer behavior and on overall margins." So, once again, low propane prices can actually work in the partnership's favor. Unit holders have seen the distribution head generally, though not annually, higher over the last 10 years.

Boring is good
Propane isn't sexy. And distributing it is even less glamorous. But it is a steady business that this trio is exploiting to grow and reward unitholders along the way. Each is going about things in its own way, but all are worth a deeper dive if you are looking for income. Sure, volatile propane prices have made headlines, but don't let that scare you away from a good business.