Tags: Williams | WPZ | MLP | energy

Williams Partners a NatGas Cash Machine

By    |   Monday, 15 Aug 2011 03:17 PM

Energy usage just keeps on rising in the United States, especially natural gas. The country consumed 24.1 trillion cubic feet last year, up 6 percent from 22.8 trillion cubic feet in 2009.

That’s good news for Williams Partners (WPZ), one of the country’s top master limited partnerships involved with natural gas transportation, gathering, treating, processing, and storage; natural gas liquid (NGL) fractionation; and oil transportation.

Williams Partners owns interests in three major interstate natural gas pipelines as well as large-scale natural gas gathering and processing assets in the Rocky Mountains and onshore and offshore along the Gulf of Mexico.

Owning natural gas pipelines is like printing money. There are a limited amount of existing pipelines, and costs and regulatory issues make it virtually prohibitive to establish new ones. Pipeline owners have long-term contracts with companies whose gas moves through the systems.

So companies like Williams are essentially toll collectors on a very busy natural gas highway. Williams owns interests in three major interstate natural gas pipelines with a total annual throughput of about 3.3 trillion cubic feet, or approximately 14 percent of all natural gas used in the United States.

Rocking returns

You invest in MLPs for their dividends of course, technically a return of your capital. Williams’ dividend is attractive, with a recent yield of 5.5 percent. While there are MLPs that yield more, keep in mind that Williams has boosted its dividend by 73 percent over the past five years.

So those who have held shares for five years are receiving a hefty 8.5 percent yield on their original investment, not to mention a 55 percent increase in the share price. Williams registered net income of $338 million in the second quarter, soaring 41 percent from $240 million a year earlier.

Williams is in a takeover battle with Energy Transfer Equity (ETE) for another midstream natural gas company, Southern Union (SUG). A victory would provide even more revenue for Williams.

Of nine analysts tallied by Thomson/First Call, five have buy ratings on Williams shares, while four have holds. The company next reports around Nov. 3.

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Energy usage just keeps on rising in the United States, especially natural gas. The country consumed 24.1 trillion cubic feet last year, up 6 percent from 22.8 trillion cubic feet in 2009. That s good news for Williams Partners (WPZ), one of the country s top master...
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2011-17-15
Monday, 15 Aug 2011 03:17 PM
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