Better Buy: Ferrellgas Partners vs. Suburban Propane Partners
The propane delivery industry in which Ferrellgas Partners (NYSE: FGP) and Suburban Propane Partners (NYSE: SPH) operate is heavily reliant on demand from heating applications. That's been a problem over the last couple of years because of extremely warm winters, which reduced demand for their services. That slack demand coupled with elevated debt loads is what led to distribution cuts at each partnership. However, Suburban's future looks more secure. Here's what you need to know to understand why Suburban is the better buy.
Suburban's distribution yield is around 10%, with Ferrellgas' yield slightly lower at 9.4%. However, it's worth noting that those yields are that high even after distribution cuts. Ferrellgas cut its disbursement a painful 80% in late 2016, with Suburban trimming by roughly a third in late 2017. The yields on these two partnerships remain elevated because their unit prices dropped along with the distributions, with Ferrellgas down around 35% so far in 2017 and Suburban off by about 20%.
Propane is used for more than your backyard cookouts. Image source: Getty Images.
Source: Fool.com
