PAA Unitholders to Further Benefit - Analyst Blog
April 11 2012 - 12:56PM
Zacks
Plains All American Pipeline LP (PAA) once more
increased the cash distribution rate extending its practice of
sharing more benefits with its unitholders. The partnership
announced a new quarterly cash distribution rate of $1.045 per unit
on all of its outstanding limited partner units.
The partnership has a long history of increasing distributions
to unitholders. With this distribution, Plains has hiked the
quarterly distribution to limited partners in 30 out of the past 32
quarters.
The new distribution reflects 2.0% growth over the quarterly
distribution of $1.025 per unit paid in February 2012 and 7.7%
growth from the quarterly distribution of 97 cents per unit paid in
May 2011. This distribution will be paid on May 15, 2012, to unit
holders of record as of May 4, 2012.
Plains’ cash distributions depend primarily on cash flow that
includes cash flow from financial reserves and working capital
borrowings. The cash distribution does not solely depend on
profitability, which can be affected by non-cash items. Hence, the
partnership can sustain cash distribution even when it is incurring
losses.
Plains reported strong fourth quarter results, which surpassed
the year-ago performance as well as our expectation. The
partnership is optimistic about maintaining its growth momentum for
the remainder of the year and expects to share more with
unitholders by increasing the distribution rate by 8% to 9% in
2012. We believe the partnership is presently on track to meet its
expected distribution growth.
We believe the steady and incremental cash distribution makes it
easier for the partnership to raise funds from the market by way of
issuing common units. Recently, the partnership issued 5.75 million
common units at an average price of $80.03 per unit and utilized
the net proceeds of $445 million to fund an acquisition partly.
Enterprise Products Partners
LP (EPD), a Plains All American peer, also increased its
quarterly cash distribution rate in January 2012. The increased
quarterly distribution of 62 cents per unit, paid in February 2012,
represented growth of 5.1% over the quarterly distribution of 59
per unit paid in February 2011 and an increase of 1.2% from the
quarterly distribution of 61.25 cents per unit paid in November
2011.
Plains All American Pipeline currently retains a Zacks #1 Rank,
which translates into a short-term Strong Buy rating. The
partnership competes with Enterprise Products Partners LP and
Sunoco Logistics Partners L.P. (SXL) among
others.
Houston, Texas-based Plains All American is engaged in the
transportation, storage, terminalling and marketing of crude oil,
refined products and liquefied petroleum gas and other natural gas
related petroleum products. The partnership is also involved in the
development and operation of natural gas storage facilities.
ENTERPRISE PROD (EPD): Free Stock Analysis Report
PLAINS ALL AMER (PAA): Free Stock Analysis Report
SUNOCO LOGISTIC (SXL): Free Stock Analysis Report
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