The Kansas City-based Inergy has about 700,000 propane customers in 33 states. (image: inergylp.com)
So it turns out that Jim Cramer, the host of CNBC’s finance show “Mad Money,” is a propane man. Two weeks ago, the enthusiastic investor took a look at FerrellGas, the #2 propane dealer in the country, and liked what he saw. And yesterday, he sized up Inergy, the #4 dealer, and drew the same conclusion. (Granted, he has endorsed both companies in the past.)
What does Cramer like? The quarterly payouts.
The major propane dealers function as master limited partnerships, or MLPs — a common arrangement in the energy sector, and one that returns a decent percentage of the profits to shareholders in the form of quarterly returns. Cramer calls them “cash machines” that dispense “juicy dividends” (though in MLP parlance, the word distribution is often used in place of dividend). And Inergy, which has about 700,000 customers in 33 states, pays out an 8.6-percent yield. In addition, Cramer pointed to Inergy’s role in natural gas storage, seeing returns from its investments in the infrastructure that gets the stuff to market. The Kansas City-based company owns four gas storage facilities, plus a potential propane storage site in New York state.
John Sherman, the Inergy CEO, makes the requisite appearance to field questions. Their most interesting exchange comes near the end, just past minute six, when Cramer rehashes a question that came up in a recent earnings call: How can the industry sustain five large retailers at the top, instead of one mega-company? No easy answer, Sherman says, but a clear opportunity. “I would think at some point you would start to see some larger scale consolidations,” he says.
Meantime, what’s the approval of “Mad Money” worth for your stock price? Shares of Inergy (NYSE: NRGY) were up 70 cents, to $42.40, in afternoon trading.