The New York Stock Exchange, a hospitable place for Big Propane this winter. (image: Christian Bobst via flickr.com)
In the heart of the heating season, stock prices for some of the country’s major propane players have been soaring. Two of the largest publicly traded retailers hit record highs last week, building on an industry-wide upswing on the market since the spring of 2009.
Shares of AmeriGas (NYSE: APU), the country’s largest propane retailer, topped $50 for the first time on Friday to post a new high. So it’s fitting that the UGI Corporation (NYSE: UGI), the utility holding company that owns a 44-percent stake in AmeriGas, hit a record high earlier this morning.
Shares of Suburban Propane (NYSE: NPH), the fifth-largest dealer, also peaked on Friday*. Meanwhile, FerrellGas (NYSE: FGP), the second-largest retailer, is flirting with historic highs. And one more: Stock in the propane wholesaler DCP Midstream (NYSE: DPM) is at a three-year high.
What do investors like? For one, it’s the middle of a chilly winter when thermostats are cranked and demand spikes — a sweet spot for propane dealers. Second, retail propane prices have also hit record highs on average, according to federal data. Third, because of the nature of the propane market, investors can expect steady dividends. Many propane customers rely on the gas as a primary energy source, and stick with a single supplier — out of loyalty, habit, or a tank lease — providing a stable consumer base and cash flow. And that can translate to tidy quarterly returns.
Of course, every heating season must end, and what will that mean for propane come March? We’ll see.
*UPDATE: Share prices for Suburban Propane went on to break their previous high Tuesday.