They pay dividends through borrowing and equity offerings anticipating that their investments in capital projects will generate enough new future earnings to cover their bet. Its an aggressive strategy.
gpd - WRONG! First - MLPs like BWP do not pay a dividend. Read up at NAPTP website to learn a little bit. MLPs use a combination of about 50% debt and 50% equity and use those dollars to build or buy infrastructure projects with usually a steady return that is well north of 10%. Thus when 1/2 your money costs you 4% and you pay a distribution of about 7% on the other 1/2 you have plenty of cash to both increase the distribution of all the units. It has been in place for some 30 years and only 3 out of over 100 companies have had major financial issues.
The dividend is effected mostly by Uncle Sam's tax policy and not earnings. Look for some weakness in these stocks over the next few weeks as both parties start to work on changing tax policy. No changes for MLPs but the boo bears will suggest other.
Since the IRA actually collected more money from the limited partners when they sell on recapture of depreciation than they would via the corporate route why would there even be a suggestion of change. The mood has changed 180 degrees and now Congress is actually looking at expanding MLPs to renewables. Any potential change only relates to IRAs in general and specifically ROTH IRAs
Dividend or Distributions isnt the question here. But the answer to your question lies in the depreciation. MLP pipelines have high depreciation which is a non cas adjustment that makes their earnings per share look far lower then the actual cash they have for distribution. When looking at companies like these you have to look at the cash flow statements.
Topline - You need to go to the website for the National Association of Publicly Traded Partnerships and read their primer called MLP 101. That will give you some information on partnerships and you can learn that they do not pay dividends - they never have. You get a K-1 instead of a broker 1099 and all the other BIG differences. THe NAPTP is where to go for unbiased information.
Suggest you read a primer on MLPs.
The distribution (not dividend) is not paid out of earnings, but out of DCF (distributable cash flow) which is much higher than earnings due to the existence of large non-cash deductions like depreciation on a pipeline.