Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

December 24, 2009 - Suburban Propane Partners L.P. (SPH-NYSE) through its subsidiaries, engages in the retail marketing and distribution of propane, fuel oil, and refined fuels, and the marketing of natural gas and electricity in the United States. The company's Propane segment involves the retail distribution of propane to residential, commercial, industrial, and agricultural customers, as well as wholesale distribution to large industrial end users.

Its Fuel Oil and Refined Fuels segment engages in the retail distribution of fuel oil, diesel, kerosene, and gasoline to residential and commercial customers for use primarily as a source of heat in homes and buildings.

The company's Natural Gas and Electricity segment markets natural gas and electricity to residential and commercial customers in the deregulated energy markets of New York and Pennsylvania.

Suburban Propane Partners, L.P. also sells, installs, and services various whole-house heating products, air cleaners, humidifiers, hearth products, and space heaters to the customers of propane, fuel oil, natural gas, and electricity products. As of September 26, 2009, it served approximately 850,000 residential, commercial, industrial, and agricultural customers through approximately 300 locations in 30 states located primarily in the east and west coast regions of the United States, including Alaska. Suburban Energy Services Group LLC serves as the general partner to Suburban Propane Partners, L.P. The company was founded in 1945 and is based in Whippany, New Jersey.

This one gets income investors' attention because it's hard to find a stock that yields over 7%. This one gives 7.3% at its current price. And that price is a new all-time high for the stock at $46.94 as this is written. So investors are already enthusiastic about this one. Here's why.

Earnings have improved nicely since 2006 when they were $2.83 a share. They went to $3.79 in 2007, then dropped a little to $3.39 in '08. Last year (2009 since the fiscal year ends in September), they bounced to $4.99. This year, the consensus estimate from 6 analysts is for $3.84, then $3.99 in 2011. Volatility comes with the stock. Earnings at SPH are seasonal, with its first two quarters showing all the profits and the last two registering losses, reflecting the higher demand for gas and oil in the fall and winter months.

Prices of oil and natural gas, the two components of SPH's products and services, move up and down quickly and often. Demand for oil and gas is influenced by the economy, and recently the economy sucked. Demand was down for most of 2009 as manufacturing slowed dramatically. That was part of the reason fourth quarter losses were almost double those of 2008 at negative 67 cents vs negative 35 cents a share.

In 2009, the company saw volume drop in both propane and fuel oil, delivering 344 million gallons of propane and 57 million gallons of fuel oil, a decrease of 11% and 25%, respectively. The reason: the recession, which has cut manufacturing activity. No one sees a quick turnaround. Investors should expect continued lower demand for at least the first half of fiscal 2010.

More numbers: Market Cap is $1.65 billion. Trailing P/E is 9.48 while Forward P/E is 11.78. Price to sales ratio is 1.41. Price to book is 4.49. Book value is $10.21. Operating margin for the last 12 months was 18.42% while Profit margin was 14.46%. Return on equity was 57%. Total cash is $163.17 million. Total debt is $353.61 million. Current ratio is 1.71. The annual dividend is $3.32, payable quarterly, for a yield of 7.3%. Beta is .46.

Income investors will like the yield here, but be aware of the price for that yield. The stock is at an all-time high with this year's earnings set to show a slight decrease. But if this recession has a quick recovery, those earnings will no doubt be revised upward.

- Company Web site: www.suburbanpropane.com

Ted Allrich