Epd has been a fantastic performer since I've owned it but I'm getting a bit nervous as it climbs higher. The divy yield as of this minute is below 5.5% - and there are many mlp's in this space that pay more.
I'm wondering whether the money will start flowing to them rather than epd. Can anyone recall at what spread this tends to happen, let's say relative to paa, ete or etp? Or whether this phenomenon has happened , ie money moving from epd to other mlp's when the yield becomes relatively lower?
Thanks in advance!
EPD has more than $4B of organic growth projects and that was before the two recent announcements. As long as EPD has that big of an organic growth pipeline there is zero point in owning higher yielding MLPs.
Look at ETP, RGP, and Capano. All have crappy balance sheets and have to JV virtually every organic project and the accretiveness of their organic growth is far inferior and their cost of money is higher than EPD.
ETP and OKS both sold at $48/share but OKS doubled and split in the last three years. Why own ETP with 7.8% yield when OKS gave you a double and a 5.5% yield?
The game is LONG TERM growth/not yield. Higher yield is reserved for the laggard MLPs. Growth plus superior long term distribution growth will create far more wealth than making a short sided decision to get 200 basis points of yield in laggard MLPs.
ferdie - you make good points - and most of my mlp money is in epd 1st, kmp 2nd and etp a distant third. However, since etp managed to sell its lagging propane business and I bought cheaply after the secondary which provided a spectacular yield, I figure I'd take a flyer. So far, so good. I'll give them a chance to turn the business around.
The yield is based on the security of the dividend, that EPD is investment grade, the type of income - fee based vs. POP for processing, and other stability factors. Also EPD has a long track record.
Money is generally flowing into ALL the MLPs because of yield there compared to bank interest rates of close to zero. The yiled is a factor of both the current dividend and then I add the prospective upcoming increases. That is why ETP has an almost 8% yield.
gotcha, if you're looking for new stocks
in pipelines. Ck out
AMLP 26 companies
MLPN 25 companies
AMJ 50 companies
MLPI 25 companies
All the funds had EPD
and KMP That should
keep you busy.
Brow151- Thanks for the list but I typically prefer individual stocks rather than etf's, especially etf's with high management fee's that these mlp's tend to have. Most of them have mgmt fees approaching 1% - and in the long run that really cuts into returns. What I will do when I have some time is look at all the stocks in the etf's to see what I'm missing by only being in three mlp's (epd, kmp and more recently etp). In effect, create my own etf at a far lower cost.
If you are nervous, sell it and pay the tax man. Nobody ever went broke taking a profit.
This often runs up before the ex-distribution date (maybe not quite this dramatically), and then sells off pretty hard on ex-day and for a few days after that. I guess people still try to beat the system with dividend capture strategies. Never made sense to me....
EPD trades at a premium to other MLPs for a very good reason. Look at the consistent track record of extremely shareholder-friendly policies. Plus, they are one of the biggest and so their cost of capital is low, giving them an edge with returns on invested capital.
If you are in it for a capital gain, I'd advise selling some (not all) here personally. I've got my units in the DRIP for long-term compounding distributions so I will just sit and watch.
Since EPD is a MLP and any passive losses cannot be taken on a partial sale, do you think that is a good idea? A partial sale also makes the conputation of taxes both then and in the future much more complicated.
I definately agree that taking a profit is always a good decision.
The move up according to GS and RBC is the funds of all sorts are putting window dressing into effect before the new year. Also individuals are still seeking yield. Where else can you get 5% with a cash distribution that increases every quarter except EPD in specific and MLPs in general?
I have been using the DRIP for 17 years. Enjoy the 5% dicounct and a return that iws steady. For EPD the question was a bit of indigestion over the ill timed issuance of units (in my opinion) that is now over. Also EPD has not moved up as fast as some of the others in the last year. IF they move to a .01 quarterly raise it will continue higher. DCF will be huge. The only downside of EPD is the capital gains on the ETE sale that will be passed through, but nothing we can do about that one now.
Happy New Year
Thanks, strum. I did notice epd usually ran higher just ahead of the ex-divy date - like you - I don't see the reason for it except perhaps nervous shorts not wanting to pay the dividend. But you've never noticed some sort of rotation into other mlp's in this space as the yield differential widens?
I realize epd is one of the stars in this space, hence the relative premium, but there's always a tipping point.