I also miss your posts that were a breathe of fresh air on KMP many years ago. Hope you are doing well as you put me into mlp's about 15 years ago. What bothers me about epd is the 1 penny rises in distribution when they are premier mi d stream mlp and should do more for holders
Are you kidding? EPD is a beast of a MLP. They raise the distribution every Q. They have nice coverage and excellent financing. They have tons of projects...but if you are expecting aggresive growth, you are in the wrong MLP. They are far to large to achieve more than pedestrian growth. Look at the enterprise value. There are not enough projects to allow them to grow at 10-15% anually like some of the small MLPs. You sacrifice stability for hyper growth.
I know you have been fed constant computer experts who have been extolling EPD. However. I have been doing this for over 15 years and the price of mlp's reflect their increase in distributions each quarter percentagewise. If you are happy with the premier midstream player being raised by a penny bmg Here are some examples of good mlp's paying about 66cents or much more at lower prices NGLS 39 DPM 45 MWE 53 LINE 39 WPZ 50 CLMT 33 MMLP 35 They may be not premier status but it is about DCF and coverage and none have slashed their distibutions in recent memory and all but one raising it's distribution a penny or MORE each quarter
They could bump it by more than a penny but then there would not be quarterly raises and they might have to issue more debt/units to satisfy yield only investors. I'm fine with the plan as it has produced the results that Chart points out above. I would caution people that most MLP"s have historically traded at a distribution yield of 250-275 basis points to the 10-year treasury. Obviously we are approaching that as the 10-year rises and the unit price rises. Point being, another 143% gain is unlikely in the next 4 years ;), but an annual combined return of 10-20% isn't bad either. Hopefully the momentum of the distribution increases can keep pace with rising interest rates which aren't going to go parabolic in the short term but should start rising in the next 6-12 months. Good luck to all.
fact of the matter is that EPD has more than enough DCF to bump the rate of distribution increase.
I am happy with the recent .0025 larger increase per Q along with the 1X .005 they gave us in Q3 which was way over due
But that doesn't change the fact that EPD will post approximately $1 Billion in retained DCF for 2012
That .0025 increase per Q distributed all of $2 million extra per Q to unit holders... which means that over the course of a year, $20 million more is distributed.... remember thats out of $1 Billion retained..... a whoppin 2 %.... which leaves the big boys 98% of that cash to reinvest in operations
Of interest are Arbs comments on the ETP bd relative to distributions...
"Richard - You obviously need to go to the National Associartion of Puiblically Traded Partenerships Organization web site and read MLP101 primer. Since MLPs pay out all of their free cash flow and pay no (or few) taxes, the usual metrics of P/E ratios and all of the other accounting metrics have little or no meaning"
EPD comes no where near paying out "all of their free cash flow"... and I have never said that they should.... I just believe that they should be paying more to the unit holders.... another .00125 bump would propel EPD higher (thats $1mil a Q and another $10 mil a year but just another 1% of the retained cash)
Which would result in less units issued the next time they do a secondary.... which obviously results in lower total distribution costs over time....
I'm in the camp that says long time unit holders should be rewarded with the perk of greater distributions... increased equity... and fewer units outstanding over the long haul
EPD unit value is constrained by its yield... the only way to see increased unit appreciation at this time is by an increase in the rate of distribution growth