Spectra offers a discounted valuation and a rich 4.5% distribution yield. Trading at an enterprise value to expected 2015 EBITDA ratio of 9.1, Spectra is one of the cheapest natural gas MLPs, and with debt to market capitalization of 20%, it is also among the least leveraged.
The distribution has risen in each of the past 30 quarters, and is expected to grow 10% this year on a per-unit basis. At the current rate of $0.60 per quarter, that’s good for a 6.4% yield at today’s prices. Distributions are amply covered by $4.33 per unit in cash from operations over the past 12 months.
Valuation suggests upside. Spectra trades at a price-sales ratio 26% below its five-year average, and revenue is expected to rise 8.6% to $2.5 billion this year.