Will Tesoro Logistics' Distribution Growth Continue?
Tesoro Logistics’ (TLLP) 4Q15 distribution per unit of $0.78 was 4% higher than its 3Q15 distribution. It represented a 17% year-over-year rise. The 4Q15 distribution rise represented the company’s 19th quarterly increase in a row of ~4% or more. TLLP’s distribution coverage ratio was 1.07x in 4Q15. Tesoro Logistics currently trades at a distribution yield of 6.7%.
The challenging commodity price environment has forced many MLPs to announce flat distributions. Energy Transfer Partners (ETP) announced a 4Q15 distribution of $1.06 per unit, which is the same as its 3Q15 distribution. Plains All American Pipeline (PAA) announced flat distributions for 4Q15 compared to 3Q15. On the other hand, Kinder Morgan (KMI) slashed its 4Q15 dividends by 75%.
TLLP’s capital expenditure
The above graph shows Tesoro Logistics’ distributable cash flow and total capital expenditure over the last two years. The right axis shows the company’s per-share distribution. TLLP’s capital expenditure rose 20% in 2015 over 2014.
Greg Goff, chairman and CEO of TLLP’s general partner, said in the 4Q15 earnings release, “During 2015, we continued to execute our strategy to grow TLLP’s integrated, full-service logistics business. We completed several organic growth projects during the year including the Anacortes terminal in November and the Connolly Gathering System in December.”
TLLP’s distributable cash flows
Tesoro Logistics’ 2015 distributable cash flows rose 92% to $422 million compared to 2014. The growth was driven by TLLP’s QEP Midstream Partners and QEP Field Services acquisitions as well as by its organic growth projects. TLLP forms ~0.6% of the Guggenheim Raymond James SB-1 Equity ETF (RYJ).
In the next part, we’ll discuss Tesoro Logistics’ forward distribution yield and see where it stands compared to its historical average.
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