Certain things just go great together, like peanut butter and jelly, or baseball and beer. And for investors, nothing goes together so nicely as capital appreciation and dividend growth.
Those aren’t exactly the most exciting terms in the world, but if you can find stocks that both rise in value while at the same time providing an increasing stream of income, you have a winning combination.
In that vein, consider DCP Midstream Partners, LP (NYSE:DPM) — a $2 billion joint venture between Spectra Energy (NYSE:SE) and ConocoPhillips (NYSE:COP). With 61 plants and more than 61,000 miles of pipeline, it plays a critical role as one of the largest natural gas gathering networks in the United States and the largest natural gas liquids producer.
DCP Midstream has traded publicly since 2005, and its primary business involves the vertical integration of all things natural gas-related — DCP gathers, processes, stores, transports and markets it. The history of the firm dates back to 1929 when its predecessor company, Panhandle Eastern Pipe Line, was founded. Its only mission back then was to extend natural gas service to the eastern U.S. markets.
Click to Enlarge Panhandle did this for decades before expanding in 1951 into gathering and processing of natural gas as well, building its first petrochemical plant to convert natural gas into its liquefied version, known more commonly as LNG. Panhandle Eastern moved its headquarters to Denver from Houston when it acquired Colorado-based Associated Natural Gas in 1994.
Three years later, Duke Energy Corp. was formed through the merger of Duke Power and the newly renamed PanEnergy. Another couple mergers later, and DCP Midstream was born as a midstream natural gas player operating across several states and Canada.
So what separates DCP Midstream from all other natural gas plays? Well, aside from its ability to shepherd natural gas from the well to the end user — taking profits at each step along the way — DCP enjoys the benefit of the backing of its much larger operational parents. That means its borrowing costs are lower than competitors without such strong support. And yet at a market cap of just $2 billion, DCP Midstream still has a lot of room to grow.