Question to anyone: If earnings are .73 cents per share per year, how can EPD pay out $1.60 per share per year? Are they borrowing this money to pay dividends? Their payout rate is 203% according to MSN Money. Their PE ratio is 32 & well above industry. Are earnings going to increase dramatically? Thanks
The only way you can look at MLP's is to go straight to the cash flow statement. They are partnership units, so the partners get all the cash they generate other than what they keep to maintain the assets and run the business (buy product inventory, for example). So comparing their payout to reported GAAP earnings isn't meaningful. Think of it like you were investing money in your neighbor's business - you'd want to get as much of it back as soon as possible as long as the business can keep running without it. The balancing act is making sure that the partnership can keep getting money from somewhere to grow. And as long as you're doing a good job you should be able to.