Moving against the broader industry trend, MarkWest Energy Partners LP (MWE) announced an increase in its quarterly distribution payout. The natural gas processor and distributor declared fourth-quarter 2014 payout of 90 cents per unit, up 4 cents or 4.7% year over year and 1 cent or 1.1% sequentially.
The increased rate raises MarkWest Energy’s annual distribution to $3.60 per unit, which reflects a yield of about 6% based on the closing unit price of $60.96 on Jan 21, 2015. The partnership added that the new distribution will be paid on Feb 13 to unitholders of record on Feb 5.
MarkWest has consistently increased payouts in the past several quarters. This reflects the partnership’s commitment toward returning value to unitholders with its strong cash generation capabilities.
During the third-quarter, MarkWest Energy generated distributable cash flow (DCF) – an indicator of cash paid out for distribution to unitholders – of $195.2 million, exhibiting an increase of about 66% from the prior-year quarter level of $117.9 million, providing 1.19x distribution coverage.
We believe that the increase in distribution will boost investors’ confidence in the stock, thereby driving unit value.
Denver, CO-based MarkWest Energy Partners LP is engaged in the gathering, processing and transmission of natural gas, transportation, fractionation and storage of natural gas liquids (NGLs), and the gathering and transportation of crude oil.
However, being a gathering and processing MLP, MarkWest is more sensitive to commodity prices than other MLP subgroups. As a result, collapsing energy prices have adversely affected their cash flow stability, which may translate into lower earnings and revenues for the partnership.
Additionally, as is the case with other MLPs, the actual amount of cash distributed to MarkWest unitholders may fluctuate and is directly exposed to the partnership’s future operating performance, which is susceptible to movements in margins and throughput volumes.
MarkWest Energy currently carries a Zacks Rank #5 (Strong Sell).
Better-ranked players from the industry include Spectra Energy Partners, LP (SEP), Delek Logistics Partners, LP (DKL) and Valero Energy Partners LP (VLP). While Spectra Energy sports a Zacks Rank #1 (Strong Buy), Delek Logistics and Valero Energy hold a Zacks Rank #2 (Buy).
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