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Enterprise Products Partners L.P. Message Board

  • mktplyr517 mktplyr517 Jan 14, 2014 11:14 AM Flag

    Time to start beating the horse again.....

    Distribution growth just doesn't cut it.....

    Unit holders deserve a bigger cut of cash flow.... (face it they keep $300 mil a Q in dist cash flow which is way too much)

    Mgmt keeps dangling greater dist growth rates but we aint gettin jack in our pockets

    This is supposed to be primarily a tax advantaged... buy and hold income play.... not the equity appreciation play that mgmt. so adores.....

    I fervently believe that there is a far sweeter spot for EPD unit equity where a greater distribution growth rate will result in significant equity gains

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    • Quite simple McDuff, if one can find a more suitable spot, then calculate your risk and make the switch. I, for one, have confidence in the EPD management style and the fact they've raised the payout 32 consequetive quarters is proof enough that their strategy works. To wit, I've held this MLP for about two years during which time the valuation has doubled and my return on investment (unDRIP'ed) is now approaching 10 percent. Plays such as this have helped me best the S&P as well as Buffet's Berkshire in 2013. Not only that, the balance sheet is strong with minimal debt and well-spent cap-ex. I'm excited about the outlook for EPD and consider it one of the best plays in the oil patch. However, if it is only the cash you are after, by all means, KMP is probably as fine a place as any to park some assets.

    • mktply - Two comments. Did you forget that EPD and EPCO stated three things two years ago. Distribution increases will be made in even cent increments and that management would review the financial picture ONCE a YEAR for evaluation of either increasing the distribution or paying out a special increase as soon as practical after the first 1/2 year numbers were in. This would mean evaluation in probably August as the June books get closed early that month or in late July.

      Second - by retaining the large amount of DCF EPD needs to issue less new units each year. This has amounted to a reduction of approximately $3B worth of units and a similar amount of debt. This has resulted in about 5M less units being issued and debt costs lower by some $120M a year assuming a 4% yield. Thus the $300 approx. retained last quarter would have been reduced by $33M, EPD would have less ability to raise its distribution by more to protect its unit price if (and when) we get a spike in interest rates, and would need to grow a bit more slowly.

      Management has not dangled anything. Sort of a choice to invest in the company to build it even stronger for the future or to pay it out now in distributions. If the retained DCF and ratio increase above 1.4 or 1.4X then you can complain a bit when the payout for November in announced. Until then they are doing exactly what they promised.

      • 1 Reply to arbtrdr
      • I prefer the cash in MY pocket.... while I would never endorse Seeking Alpha there was an interesting piece yesterday that compared total return of EPD and KMP

        The conclusion of that author was the total returns were equivalent only differing in that limited partners had far more flexibility in what to do with that return because a greater % was returned via distribution

        Furthermore what benefit comes from only increasing distributions in full cent increments?... Its an invented argument by management that favors management at the expense of unit holders

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