Units of Enbridge Energy Partners L.P. (EEP) reached a 52-week high of $37.25 on Sep 9, 2014. In fact, the company has seen its stock price climb over 25% since the beginning of the year.
What is Driving the Stock?
The primary growth drivers for Enbridge Energy are its low risk business model, stable distribution and favorable incentive distribution rights (IDR) restructuring by its parent company Enbridge Inc. (ENB).
A focus on fee-based and diversified businesses has enabled Enbridge Energy Partners to dilute its business risks as well as steadily enhance its earnings profile. We remain positive on Enbridge, given its wider exposure to the Bakken Shale, the Haynesville Shale and GraniteWash.
At the time of its second-quarter results, the partnership announced cash distribution of 55.55 cents per unit ($2.22 per unit annualized), up 2.1% from the preceding quarter. This announcement was an indication of the partnership’s equity restructuring moves. Lower distribution share of its general partner not only improves Enbridge Energy’s cost of capital but also facilitates greater cash for unitholders.
Moreover, the partnership owns one of the world’s longest petroleum pipeline systems that transfers over 60% of the Canadian oil output to the U.S. This unique position helps Enbridge Energy to capitalize on the growing Canadian oil sands production.
Also, Enbridge Energy’s move to dropdown assets to its spun-off entity, Midcoast Energy Partners, L.P. (MEP) has scored well with investors. The partnership’s restructuring move to have liquid-focused operations should favor earnings going forward.
However, Enbridge Energy currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months. Hence, with Enbridge Energy units trading at a 52-week high, further upside from here may be limited.
Stocks to Consider
Investors interested in the same sector could consider stocks like Sunoco Logistics Partners L.P. (SXL), which sports a Zacks Rank #1 (Strong Buy).
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