Plains All American Pipeline, L.P. (PAA) continues with its steady effort towards maximization of unitholders’ wealth through payment of increased cash distribution at regular intervals. The partnership raised its quarterly cash distribution rate by 2.4% sequentially and 9.8% year over year to 64.50 cents per unit. The market reacted positively to the news and the unit price edged up around 0.8% to $58.25 on Jul 9, 2014 from the previous day’s closing.
The revised cash distribution will be paid on Aug 14, 2014 to unitholders of record as of Aug 1.
On an annualized basis, Plains All’s cash distribution rate will come to $2.58 per unit, which reflects a cash distribution yield of 4.4%, significantly higher than the industry average.
Earlier, Plains All had expressed its intention to hike its quarterly cash distribution rate for 2014 by 10% from the prior-year level.
Plains All has a stable cash distribution payout history. The partnership has increased its quarterly cash distribution to limited partners in 39 out of the past 41 quarters.
The last quarterly cash distribution hike was made in Apr 2014. The quarterly cash distribution rate has increased 2.4% to 63 cents per unit from the previous payout.
Plains All maintained a stable liquidity position backed by efficient cash generating capacity. As of Mar 31, 2014, the partnership had a total liquidity of $1,982 million, including $1,952 million available under the revolving credit facilities and cash balance of $30 million. During first-quarter 2014, Plains All had cash flow from operating activities of $822 million.
In addition to paying cash distributions, Plains All also utilizes funds for expanding its existing operations. Currently, the partnership is in the middle of several growth projects based in the in the Permian Basin and in Canada. Plains All intends to spend $1.75 – $1.95 billion under the 2014 expansion capital expenditure. The scheduled completion of these growth ventures will enable the partnership to meet its fund requirements for distribution payment and growth projects.
Plains All currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the same industry include Delek Logistics Partners, LP (DKL), Energy Transfer Equity, L.P. (ETE) and Magellan Midstream Partners LP (MMP). All these stocks hold a Zacks Rank #1 (Strong Buy).
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