7 MLP Giants That Keep Raising Distributions, Even Through Recent Hard Times

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With oil having rallied massively from its 2016 lows, the investor interest in the energy sector has come back strong. The post-election rally also seen as pro-energy, and that is viewed positively for oil and gas outfits. Despite a rise in interest rates, there has also been an interest in master limited partnerships (MLPs) due to their transportation toll-road models and their positions as having some defensive and massive infrastructure.

Whether all of this new domestic energy drilling will take prices back down, particularly with so many of us questioning whether OPEC will live up to its production cuts, remains to be seen. Either way, the energy sector has seen more interest in the second half of 2016 and into 2017 than it saw in all of 2015 and at the start of 2016.

24/7 Wall St. decided to look for MLPs that bucked the trend of distribution cuts over the past three years or so. While other MLPs have maintained their distributions, we found only seven existing large MLP structures that have continued to raise their quarterly distributions from 2014 to 2016. Some already have announced distribution hikes in the first week of 2017.

One impetus for this view was that Barron’s recently showed some of its top income ideas for 2017. The financial publication was very negative on the MLP sector as a whole, panning it and listing it as a sector to avoid in 2017. Also, it was just on the first day of the year that the firm Janney responded to the Barron’s report showing that its projections painted too broad of a brush on the sector valuations. And Stifel just released its five top MLP picks for 2017, and there was very little overlap with the following seven MLPs.

In an effort to make sure these MLPs were not one-offs or too small to matter, each had to have a market cap well over $1 billion. All of these do, and then some. We took data directly from each company’s releases about distributions to confirm the reports. Other data were used for the market caps, closing prices, trading ranges and the equivalent yields of distributions. Thomson Reuters was used for analyst and select financial data.

What MLP investors need to consider for 2017 is that not every partnership is out of the woods, even as oil continues to remain handily above $50 per barrel. Because MLPs pay distributions from their distributable cash flow rather than classical earnings and/or cash flows from traditional corporations, these “yields” are not the traditional ones you get from common stocks.

The most important issue to consider here is that there are no assurances at all that history will repeat itself with future distribution hikes. Lastly, analyst price targets change through time, and investors have noticed how much volatility was seen in 2016.

Here are seven multibillion dollar MLPs that now have multiyear histories of raising their distributions through the hard times seen from late in 2014 into 2016.

Enterprise Products Partners

Not only does Enterprise Products Partners L.P. (NYSE: EPD) remain among the largest of all MLP structures, but it is considered among the best run of them all. On January 5, 2017, it announced that its quarterly cash distribution paid to partners would be $0.41 per common unit ($1.64 annualized) from a prior level of $0.405 per unit. This represented a 5.1% increase from a year earlier and is said to be Enterprise’s 59th distribution increase since coming public in 1998. It also was shown to be the 50th consecutive quarterly increase to the distribution, and that is one hell of a streak.

Its units were recently trading at $27.43 apiece, and Enterprise Products Partners has a market cap of almost $58 billion. Its 52-week trading range is $19.00 to $30.11, and the consensus analyst target price is up at $31.88. Its yield-equivalent is about 6%. Its history of distribution hikes since 2013 is as follows:

  • ‎Oct.‎ ‎27‎, ‎2016, $0.405
  • July‎ ‎27‎, ‎2016, $0.400
  • Apr. ‎27‎, ‎2016, $0.395
  • Jan.‎ ‎27‎, ‎2016, $0.390
  • Oct.‎ ‎28‎, ‎2015, $0.385
  • July‎ ‎29‎, ‎2015, $0.380
  • Apr‎. ‎28‎, ‎2015, $0.375
  • Jan.‎ ‎28‎, ‎2015, $0.370
  • Oct.‎ ‎29‎, ‎2014, $0.365
  • July‎ ‎29‎, ‎2014, $0.180
  • Apr.‎ ‎28‎, ‎2014, $0.177
  • Jan.‎ ‎29‎, ‎2014, $0.175