The single worst way to play the U.S. energy boom is with "big
oil" stocks like BP, Exxon, and Chevron. During a time when
energy production has been soaring, these companies have been
That's just one of many reasons that these big three oil
stocks are down over the last year…during a time when the stock
market and crude oil prices are considerably higher.
But there is a select group of companies in the oil and gas
business that are likely to deliver far superior returns…beating
big oil stocks, the S&P 500, and every other major market
index in the next five years.
These companies are called Master Limited Partnerships, or
MLPs, and they're one of my favorite ways to play the energy
boom. One way to invest would be to simply buy the
JPMorgan Alerian MLP Index (
- an ETF that owns 30 of the biggest MLPs.
But if your goal is to truly build wealth, there is a far
better way to invest. Not all MLPs are created equally, however.
While many MLPs may
attractive, you must be selective.
Today I'm going to tell you about two MLPs that may appear
very similar. But their performance over the last five years has
been considerably different. Using a simple wealth secret, you'll
learn how to select only the best MLPs for your investment
The first company is
Boardwalk Pipeline Partners (
. The Houston-based company with 14,000 miles of pipelines is in
the business of transporting, storing and processing natural
The company's revenues and net income are relatively flat over
the last three years. Like most MLPs, Boardwalk throws off
some nice operating cash flow of $575 million a year. That
was more than enough to cover the $479 million in distributions
last year (note - since MLPs are technically partnerships, their
dividends are called "distributions").
Since the business isn't really growing, Boardwalk hasn't
raised its distributions much in recent years. Payments to
shareholders have increased a total of 10% in the last five
The second company is
MarkWest Energy Partners (
. Like Boardwalk, MarkWest is in the business of
collecting, processing and transporting natural gas in some of
the biggest shale plays.
MarkWest's business is growing nicely. In the last three
years, its revenues are up 22% and operating cash flow is up 59%.
That growth has allowed the company to aggressively grow its
shareholder distributions. Over the last five years, the
quarterly distribution has grown by one-third.
The similarities between Boardwalk and MarkWest are
considerable. The companies operate in the same
sector. They're about the same size. And five years
ago, you could have bought either stock for about $20.
But the performance of these stocks has been quite
Boardwalk shares are up a healthy 61% in the last five years.
That was enough to beat the S&P 500 index, but was well short
of the 92% increase in the MLP index.
Meanwhile, MarkWest crushed them all, with a 216% capital gain
over the last half-decade. Of course, shareholders also received
considerable dividends along the way too…
The secret to building wealth with MLPs is found not by
investing in the highest yielding companies, but by owning the
companies that are growing their business by investing in new
Growth MLPs often pay lower yields since they're reinvesting
some of their profits in new pipelines, processing, and storage
facilities. But because they're growing, they can regularly
increase their distributions. Over time, share prices are highly
correlated with distribution growth - and that makes these MLPs
far superior to high-yielding ones.
Today, Boardwalk offers its investors a healthy 7% yield.
Compared with the 4.7% yield from MarkWest, an income investor
might mistakenly think that Boardwalk is the superior
But MarkWest's commitment to its shareholders is crystal
clear. Since its IPO in 2009, the company has raised its
distribution by 12% per year. If that growth continues in the
years ahead the stock is likely to deliver a total return of
about 17% per year.
MarkWest is a great company worth your consideration, even
after its recent run. If you'd like to hear about another of my
favorite MLPs, then please join me for my upcoming investing
The event -
U.S. Energy Alert: 3 Profit Plays for 2014 and
- takes place this
Thursday at 2 p.m. Eastern Time
. The live investing seminar takes place over the phone,
and it's absolutely free. For your convenience, I'll even call
If you want to hear more about big profit opportunities in the
high growth U.S. energy sector, you'll want to tune in. I'll be
sharing details on two of my top investment recommendations.
Plus, we'll have lots of time for a live Q&A session.
The event is in just two days - and we're filling up quickly.
All you need to do is
click here now
to reserve your seat.
I look forward to having you join me for this live investing
Be sure to be at your phone at 2 p.m. eastern on
- I'll be calling you directly if you choose to attend.