TC Pipeline Focus on Unitholder Return

Zacks

Pipeline operator, TC PipeLines LP (NYSE:TCP) announced stable fourth quarter 2013 cash distribution of 81 cents per unit ($3.24 per unit annualized). This represents almost 3.8% higher year-over-year quarterly payout by the partnership, which has a strong focus on unitholder return.

TC Pipelines has been consistent with its distribution payment, indicating financial stability that may attract investors looking for a steady income. In fact, the latest payout marks the partnership’s fifty-ninth consecutive quarterly cash distribution.

Calgary, Alberta-based TC PipeLines is a master limited partnership, with interests in six pipeline systems: the Northern Border Pipeline Company (:NBPL), Great Lakes Gas Transmission, L.P, the Tuscarora Gas Transmission Company, the North Baja Pipeline, LLC, Bison Pipeline, LLC, and Gas Transmission Northwest, LLC.

We believe the partnership’s value will likely remain clouded, as it struggles with volatile natural gas fundamentals. Moreover, there are reasonable concerns about the long-term availability of natural gas transported by NBPL due to the growing maturity of the pipeline’s catchment area – the Western Canadian Sedimentary Basin. The contracting scene for Great Lakes Gas Transmission looks bleak as well.

TC Pipelines failed to beat the Zacks Consensus Estimate in the last four quarters with an average negative surprise of 17.2%. Moreover, in the past 30 days, the estimate for full year 2013 has moved down 2 cents and is currently pegged at $2.10 per unit.

All these factors are incorporated in TC Pipelines’ Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players in the same industry such as Crestwood Equity Partners LP (NYSE:CEQP), Enbridge Energy Management LLC (NYSE:EEQ) and Summit Midstream Partners, LP (NYSE:SMLP). All these stocks currently carry a Zacks Rank #2 (Buy).
 

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