A Pipeline to Energy Profits

Partnerships that transport and store oil and gas are big moneymakers no matter which way crude prices are headed.

Energy stocks are looking pretty attractive if you believe that oil prices -- down from $145 per barrel in July to $41 lately -- will soon take off on a new and extended upturn. The 32% run-up in oil prices between December 23 and January 9 may be an indication that oil's slump is over. (Then again, maybe it's not.) Fortunately, you don't need to know which direction oil prices are headed to make money now from one of the best buys in the sector: partnerships that invest in pipelines and storage facilities for oil and gas.

Shares of these partnerships are offering rich current yields -- 8% to 10% for our favorites -- and the most stable of these firms are unlikely to cut their payouts. That's because the profits of many pipeline operators aren't tied to the prices of oil and gas. Instead, operators make their money by charging set fees for transporting energy products from one place to another and then storing them. Many have local or regional monopolies and stable cash flows from long-term contracts.

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Contributing Editor, Kiplinger's Personal Finance