Cheniere Energy: High Yield in Natural Gas Shipping

07/09/2020 5:00 am EST


Sean Brodrick

Senior Editor, Weiss Ratings

Cheniere Energy Partners L.P. (CQP) is a master limited partnership (MLP) with a market cap of $17.44 billion; it’s a subsidiary of Cheniere Energy Inc. (LNG). Both companies process and ship natural gas around the world, notes Sean Brodrick, editor of Wealth Megatrends.

Why are we recommending CQP over LNG? Because the parent company doesn’t pay a dividend. Cheniere Energy Partners raised its quarterly dividend by one cent in April, to 64 cents. And CQP’s dividend is projected to grow 3.1% per year for the next three years.

The hefty distribution now yields 6.8%. That’s solid compensation while you wait for what I believe will be significantly higher oil and gas prices by the end of 2020.

That’s its second one cent increase this year. Contrast that to the nearly half of midstream companies that cut their dividend payouts in the first quarter. To support that dividend, Cheniere Energy Partners signs contracts with long-term customers who don’t depend on short-term price for business sustainability.

Cheniere Energy Partners ships liquefied natural gas from a special export terminal, Sabine Pass LNG, in Louisiana. Sabine Pass is located less than four miles from the Gulf of Mexico.

The company also has an export plant in in Corpus Christi, Texas. It also owns a pipeline that keeps the supply of gas flowing to the terminal. The company operates five natural gas liquefaction facilities, or “trains,” and is building a sixth that should be operational in 2023.

First-quarter earnings nearly doubled from a year earlier and easily topped estimates, while revenues rose nearly 20% year-over-year to $2.7 billion.

Management noted it has seen a rise in the number of canceled liquified natural gas cargoes. But the company added this shouldn’t impact its full-year financials since customers remain obligated to pay fixed fees. So, it’s a rock-solid business with a growing dividend. Cheniere Energy Partners is a great addition to your portfolio.

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