Stocks to Buy: AmeriGas Partners (APU)
Unfortunately, rising exports of LPG and propane mean that there will less supply of the fuel here at home. That means Americans will be faced with higher prices. This past winter, domestic propane prices surged by more than 200% as exports have risen.
While AmeriGas Partners (APU) doesn’t actually export LPG overseas, it is the largest supplier of propane in the United States — reaching nearly 2 million residential and industrial customers. That makes it an easy selection for our list of energy stocks to buy.
Its size and scope have made it possible for APU to pass on incremental prices increases to its customers. Propane distributors often have virtual monopolies in the towns they operate in and own the tanks/equipment attached to people’s homes. Switching costs for consumers are very high.
As such, AmeriGas has a gross profit margin of nearly 44%.
That margin produces some steady and hefty cash flows at the MLP. It also results in a high dividend yield of 7.7%. All in all, APU is one of the best stocks to buy if you want to play rising domestic prices for propane.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.