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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