Suburban Propane Heats Up
Brrrr! Many of us are enduring some downright frigid temperatures lately. So while you're sitting at home, staying out of the snow and wind, I'm sure the one question on your mind is, 'How can I make money off this arctic-like weather?' Cramer, as always, is here to help you with that dilemma. And his answer is one that many of you faithful viewers have been on to for a while: Suburban Propane Partners. After so many of you talked this one up, Cramer did his homework. And the result? He's feeling the warmth too.
Suburban is an energy outfit that delivers propane and other fuels to over a million customers. Like Kinder Morgan, another company often mentioned by Cramer, Suburban is a master limited partnership (MLP) -- it distributes a majority of its profits as dividends to its shareholders. Another reason to love MLPs is that they aren't heavily owned by hedge funds. Average retail investors -- like you -- own 90% of propane MLPs compared to 63% for all MLPs. That means Suburban Propane and other propane MLPs won't be appearing on the next episode of "Hedge Funds Gone Wild."
Still, you might ask why you should play propane now, when the three top propane MLPs are down 27% the year. But that loss is better than that of the Alerian index (the top 50 energy MLPs), which is down 44%, or the S&P 500, down 41%. Propane also tends to be more stable than other energy stocks, like gas or "green" energy. And with its impressive 10.7% yield Cramer asks, "Isn't stability what you're looking for?"
Another reason propane is doing so well now is its wide profit margin. The wholesale price of heating oil is down 43% but the propane companies haven't passed those savings to their customers -- the retail price is down only 33%. I know, I know... the consumer part of you is outraged, as you think about your winter heating bill. But the investor side of you -- well that side should be pretty happy with that nice, fat profit margin. And don't forget we're only at the end of December, with at least two more months of Old Man Winter ahead. That puts Suburban in a good spot for now.
Finally, look at Suburban's dividends, "the main reason to own this stock." Its expected 2009 payout is $3.34 per share -- the aforementioned 10.7% yield. The company has had 10 consecutive increases in quarterly dividend payouts. With over $4M in cash flow expected next year, it will cover that payout handily. Its balance sheet looks great too: $4 per share and a $175M credit facility. All of that means that even in a worst-case scenario with its business falling apart, "it has the balance sheet to keep supporting it."
Cramer's Bottom Line: "You asked, I answered -- Suburban Propane Partners, with that 10.7% yield, is a buy, buy, buy!"
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