BWP is a Master Limited Partnership (MLP) that owns and operates two natural gas pipelines. The price of natural gas doesn't matter. The company makes money on the volume of gas it transports. And, because it's an MLP, it has to pay out its excess free cash flow... what it makes... to you in the form of a tax-deferred dividend distribution of $1.90 per share. That works out to a 7.92% yield right now. The distribution is expected to go up to $2.07 a share in 2009. That's an 8.63% yield. Do I have your attention?...

I was going over various yields you could get for taking a lot of risk, and it's amazing how small they are versus this...

Now it just doesn't get better than this kind of yield... Remember, if the stock goes lower, the yield goes higher... so I would buy this one using yield-based scales. Remember how I like to do it... As it goes down, as the yield gets bigger, I'd buy more. You can put it on (buy some now) at its current price, but then I'd wait for the stock to go to $20.07... where the yield's 10% there... 10% on next year's payout...

Because BWP is a Master Limited Partnership, the distributions are tax deferred. These MLP's are complicated, tax wise... So, if you buy one of these... I know this is a bummer... but you've got to talk to a professional tax advisor to make sure you pay the right taxes. They are complicated... but, among the wealthiest people I know, this is what they are piling into. This is all people are talking about... is this kind of security.

But how can we be certain of that yield?... How do we know that BWP is safe?...

 

Well, aside from the fact that it should bring in about $2.81 a share of cash flow in 2009... more than enough to cover the $2.07 expected payout... how about the fact that the company is 70% owned by the Loews Corp. (L)?... LOEWS... And they're also its creator... Now you know what's behind them... that's the Tisch family, and the Tisch family is as good as it gets. They're backing BWP to the hilt.

Okay, look... in full disclosure, the Tisch family isn't perfect... This week, they had to put money into Loews' insurance subsidiary, CNA Financial (CNA), because of some soured investments. I want to give you that, because otherwise, if you invested alongside them over a multiple period of years, and including the period of years that I was proud to call on them as a salesperson from Goldman Sachs, they are terrific, okay... They do more homework, and they're more knowledgeable... and anyone who owns Diamond Offshore (DO) knows the kind of return that they have given you... So investing alongside them is a terrific opportunity. I think you should take it.

Remember, with interest rates coming down globally, we live in a yield-starved world... people are desperate for it... which is why an 8% yield, that's subject to very little tax, can be a gigantic Ryan Howard home run...

Not only does Loews own 70% of BWP, but today we found out they're pumping a billion dollars... that's why I'm doing the story today... a new data point... a billion dollars more into the company, by buying equity to help it expand... with a first installment of $500, and another to come by the second half of the year.

See, because BWP is a Master Limited Partnership, it has to pay out its excess cash flow to investors... so it can't save for new projects... so, when it wants to expand, unfortunately, it has to go hat in hand for new money.

BWP has about $1.8 billion in remaining building expenses to meet its growth goals. It needed $1 billion of outside capital, and you know how hard it is to raise outside money right now, so what they did was they went to their backers, Loews, and now you benefit, just by the fact that the Tisch's put money in... This is what you want... Is it a gift? I don't know, it kind of seems like it.

Currently, BWP has two subsidiaries... the Gulf South pipeline... That gathers natural gas in Texas, Louisiana, Mississippi. And Texas Gas Transmission... the old "TGT"... which moves the gas from the gulf coast to the Midwest.

BWP also has three projects that are expected to double its revenues by 2012... as well as doubling the life of its pipeline contracts...

The first one is called Gulf Crossing... 1.4 billion cubic feet of natural gas per day per pipe, when it's ready in 2009. The second, the Southeast Expansion... I'm telling you all this, because you have to understand that this will grow... The Southeast Expansion will grow BWP's pipeline into 2009 too.

The third projects... Fayetteville and Greenville laterals... They're going to connect the pipeline network to the Fayetteville Shale... you keep hearing about that on this show and everywhere else... We used to talk about that all the time when natural gas prices were higher.

These are the areas where natural gas will have to come from, if we want to attain energy independence. We need pipelines to move the gas, and BWP either has them or is building them.

Both presidential candidates talk about energy independence. If they end up walking the walk, they'll promote natural gas. And, from BWP's perspective, that's good for business.

Every time they expand, the chances of a payout increasing are dramatic... And we know from huge Cramer-fave, Kinder Morgan Energy Partners (KMP)... Did you see how that did?... Did you see KMP this week? I mean, come on... you've got that great yield, and you've got more upside than most any stock that you may have owned. So, that's what Boardwalk Pipeline Partners, LP (BWP) could be like.

The bottom line...

The Bottom Line!:     It's paying an 8.63% tax-deferred yield to wait for its pipeline to build out... It's got the full backing and the full faith and credit of the Lowes Corporation. I think this is a great stock to take shelter in, particularly if next week does not follow up on this week's great 10-11% increase in the stock market.

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