The monumental drop in the price of oil originally was believed to leave some master limited partnerships (MLPs) unscathed. This has been far from universally true, and many MLPs have had to dial back on their distributions. That is not the case universally. Some MLPs are even still raising their distributions, and that allows for some investors to live off these distributions just like dividends — but often with some tax benefits due to a return of capital component.
24/7 Wall St. wanted to look at the few MLPs that have still been raising their distributions. Several distributions were raised in July, and we have seen a focal point with raised distributions in a few key MLPs so far in August. And now we have also seen that the key Alerian MLP index has bounced nearly 5% from its lows.
Another positive from this past week was that Credit Suisse upgraded the MLP segment to Overweight. This was on the heels of a sharp sell-off, and Credit Suisse believes that the MLP risks now are skewed to the upside.
24/7 Wall St. has reviewed the top MLPs with higher payouts in recent days and weeks. This matters far more than MLPs that raised their distributions earlier in the year and have left them static. After all, oil prices just challenged new six-year lows in recent days.
Energy Transfer Equity
Energy Transfer Equity L.P. (NYSE: ETE) released its results on August 5, showing that distributable cash flow was $335 million for the June 2015 quarter, up from $218 million a year earlier. Its board of directors approved a $0.02 increase in its quarterly distribution to $0.265 per ETE common unit on a post-split basis. This was an increase of 39% from a year ago and 8% from the prior quarter. Its distribution coverage ratio was listed as 1.19 to 1.00. As a reminder, the company had entered into an exchange and repurchase agreement with Energy Transfer Partners L.P. (NYSE: ETP) in July whereby it will exchange 21.0 million ETP common units for 100% of the general partner interest and incentive distribution rights of Sunoco.
Energy Transfer Equity is one of the top MLPs by market cap, with its $30.05 recent price bringing a value of about $32.5 billion. It has a consensus analyst target price of $41.00 and a 52-week trading range of $22.94 to $35.44. Credit Suisse was recently positive on ETE/ETP.
Magellan Midstream Partners
Magellan Midstream Partners L.P. (NYSE: MMP) announced net income of $177.4 million for its second quarter of 2015, which was up $31.1 million, or 21% higher, than in the second quarter 2014. Its distributable cash flow was $222.8 million, up 14% from a year ago. This allowed Magellan to increase its annual distributable cash flow guidance again for 2015. In July, Magellan Midstream’s board approved an increase in its second-quarter cash distribution by 3% sequentially to $0.74 per unit, but that is up 14% year over year.
Magellan’s current market cap is $15.5 billion, and its distributable yield-equivalent, if it were to remain static, is roughly 4.35%. Magellan Midstream Partners recently traded at $69.80, and it has a 52-week range of $61.37 to $90.08.