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A Closer Look at Propane MLP Yields

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Jun. 3 2016, Updated 8:04 a.m. ET

Distribution yields

Suburban Propane Partners (SPH) currently trades at a distribution yield of 11.1%. In comparison, AmeriGas Partners (APU), Ferrellgas Partners (FGP), and Star Gas Partners (SGU) trade at distribution yields of 8.6%, 10.5%, and 4.5%, respectively.The Alerian MLP Index (AMZ) trades at a yield of 7.8%. AMZ is an index of the MLP sector’s top 50 MLPs. Distribution yield is calculated as distribution per share divided by market price per share.

The Alerian MLP Index (AMZ) trades at a yield of 7.8%. AMZ is an index of the MLP sector’s top 50 MLPs. Distribution yield is calculated as distribution per share divided by market price per share.

A Closer Look at Propane MLP Yields

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The above graph compares the distribution yields of our four MLPs and AMZ. AmeriGas Partners has a track record of consistent distribution growth. This contributes to its relatively lower yield. In April 2016, the MLP increased its distributions for the 12th consecutive year. APU accounts for ~0.06% of the PowerShares Dividend Achievers ETF (PFM).

Ferrellgas Partners’ high leverage is likely one of the reasons behind its relatively higher yield. Ferrellgas Partners increased its quarterly distributions in September 2015. Before this, the company had fixed distributions of $0.50 per share every quarter for nearly 20 years.

At the same time, with its track record of stable dividends, Suburban Propane Partners seems to be trading at an attractive yield. Both Ferrellgas Partners and Suburban Propane Partners currently trade at higher yields compared to their historical averages.

Star Gas Partners trades at a low yield

Star Gas Partners’ history of stable distributions and increasing share prices over the past year likely explains its relatively low distribution yield. SGU has been retaining most of its cash flows for future growth and acquisitions. The small-cap MLP currently has a market capitalization of $505 million.

Now let’s look at where the current valuations of these MLPs stand.

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