In an effort to improve its unitholders’ wealth, Plains All American Pipeline, L.P. (PAA) declared a 9.8% year-over-year and 2.3% sequential increase in the quarterly cash distribution rate. The revised cash distribution of 67.5 cents per unit will be paid on Feb 13, 2015, to unitholders of record as of Jan 30.
The increased rate raises Plains All American’s annual distribution to $2.70 per unit, which reflects a yield of 5.3% based on the closing unit price of $51.15 on Jan 8, 2015. The distribution yield is significantly higher than the industry average of 1.8%.
The latest hike would mark the 22nd consecutive quarter of incremental distribution by Plains All American. The partnership has increased its quarterly distribution to limited partners in 41 out of the last 43 quarters.
Plains All American’s strategy of paying cash distribution and increasing the same at regular intervals reflect its commitment to enhance long-term value of its unitholders. During a conference call in Dec 2014, the partnership stated that its midpoint cash distribution target for 2015 is pegged at 10%.
Previously, in Oct 2014, Plains All American had announced a 10% hike in its quarterly cash distribution rate to 66 cents from 60 cents a year ago.
A stable liquidity profile supports Plains All American’s systematic distribution rate-hike program. The partnership’s total liquidity as of Sep 30, 2014, stood at around $2.55 billion. Cash flow from operating activities in the first nine months of 2014 amounted to approximately $1.28 billion.
With around 371 million weighted units outstanding at the end of third-quarter 2014, Plains All American needs to allot roughly $1 billion annually as distribution.
Apart from paying regular cash distributions, Plains All American utilizes funds for expanding its operations through both organic and inorganic growth, and efficiently realizes positive synergies from these ventures. Scheduled completion of several under-developed projects and synergies from the acquired assets are expected to provide steady cash inflow to the partnership, thereby meeting its fund requirements for distribution payment and growth projects.
Plains All American currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Enbridge Energy Management LLC (EEQ), PBF Logistics LP (PBFX) and Spectra Energy Partners, LP (SEP), each carrying a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment