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Enterprise Products Partners L.P. Message Board

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  • businessguru75 businessguru75 Sep 13, 2012 8:47 AM Flag

    Well its September...

    you realize it's better for the unit price if they retain cash and put it to work rather than up the distribution and issue more debt or units right? If this was at 40 and yielding 6-8% no one would care. Do you want the unit price to appreciate the time along with a rising distribution or do you want a raised distribution one time and to park the share price in neutral. I don't think I've ever seen someone so disenfranchised by a company they own and continue to own it as long as you.

    Side Note: They have no plans on raising the distribution this year above the standard raise. Somewhat disappointing but management knows what it is doing.

    Sentiment: Hold

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    • Mktply - You are not correct in your comments about retained cash. Sorry. EPD files a partnership return and any profits or losses are allocated to the partners in the year they occur. Retaining cash does not cause a taxable situation. I think you are confusing the discussion about companies retaining $$ overseas so they do not need to pay taxes. That is not the situation with EPD. The big tax bill to unit holders would be if EPD decided to sell a buch of their assets and we got hit with huge capital gains.

      Business - Wondering how you know EPD is not changing the distribution for Q3 or Q4? Given their last conference call - that is exactly what they said they were going to take another look at. I also think your suggestion a small increase would be a one time event is maybe not what you meant. EPD could increase to say .70 next quarter and that sort of increase would not be sustainable.

      The philosophy of EPD as described to me about 6 years ago is to provide a steady and predictable return to investors through steady distribution increases. They did agree some years back that the rate of increase would need to change to keep their goal of 5-6% in place. EPD also wants to maximize the DCF per unit and limit the number of new units issued. This they felt and still feel maximizes the unit value. They offer all of the holders an additional return on their distribution of 5% if you reinvest and this along with the cheap debt is a super opportunity to grow very fast and very profitably. Growing at a $2-4B rate from organic projects does indeed put a bit of a hit on DCF in the short run. However, I personally hope we continue to have the current crazy rate of new projects go on for a few more years. Then when growth slows down the distributions can move even higher.

      Last, there is an interesting difference of owning a partnership compared to a corporation. In a corporation the shareholders elect the board and technically run the company. In a partnership the GP runs the company and the limited partners get to vote on little or nothing. Only with usually a 2/3 vote can the GP be replaced and the GP usually owns more than 1/3 of the units. Limited partners have almost no rights except moral ones in a partnership.


      • 1 Reply to arbtrdr
      • they will raise it the standard .075 as per usual, but a higher hike is not coming this year due to the large amount of projects in the pipeline. They would rather not issue more or as many units to fund projects and acquisitions and keep the distribution on the straight and narrow for this year. Keep in mind the folks making these decisions would benefit the MOST from an increased distribution as they hold many of the units. If they are not raising it more than the typical amount, I am willing to bet there is a good reason. I would look for perhaps a .1 increase to begin in quarter 2 of next year. That's a prediction, but there will be no bump this year, that much I know.

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