the S-1 says .3375 cents per qtr or 1.35 per yr minimum which equals 190m in annual dividends vs DCF is 225m so coverage ratio would be 1.18. 5% or so yield, its ok, kinda low unless think DCF going up big...rather own MWE, APL, or RGNC
you have to remember, CHKM has no debt, so there is no leverage amping up the return. just a quick look at rgnc, debt:equity is about 1:1, so it *should* pay a higher yield (which it in fact does). So that's the most concrete reason to expect rapid distribution growth from CHKM.
Look at this from CHK's point of view -- they can raise large amounts of cash by having CHKM borrow money to buy assets from them without larding up their own balance sheet. As CHKM increases distribution and their unit price increases, CHK can sell their CHKM units at a large profit, essentially getting a second payday from the same assets. But then, because of the IDR, they still get half the cash flow from those assets that they've already sold twice. That's why I think CHK will do everything they can to get the distribution to $2 sooner rather then later, that's the best point for them to get another big payday.
A 7% yield on $2 distribution is about $28.50/unit; at 6%, it's over $33/unit, I think in 2-3 years we'll be somewhere in that range.
Thank You very much! As a pure amateur, I can't help but wonder whether the extremely hot weather this summer is boosting flows of natural gas through pipelines to power plants and if this will drive up this MLP's earnings in quarter three! Comments?