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Williams Partners Hikes Cash Distribution

Zacks Equity Research

Energy infrastructure provider, Williams Partners L.P. (WPZ) announced that the regular quarterly cash distribution to its common unitholders has been increased to $0.9045 per unit.

The board of directors of the partnership's general partner has approved the quarterly cash distribution, which is payable on May 9, 2014, to common unitholders of record at the close of business on May 2.

The new per-unit amount is a 6.73% increase over the partnership's distribution of $0.8475 per unit that was paid in May 2013. It is also a 1.34% increase over the partnership's previous quarterly distribution of $0.8925 per unit.

Based on the closing price of $52.21 as of Apr 22, the increased distribution affirms a yield of 6.9%. A steady distribution payout facilitates the long-term strategy of the partnership to provide attractive risk-adjusted returns to its unitholders.

The distribution hike reflects continued strong performance by Williams Partners, backed by solid operating results, good investments and a diligent execution of its strategic plan. We believe that the partnership will be able to generate sufficient retruns for its unitholders in the coming years, backed by strong operating performances and good management decisions.

On Feb 19, the partnership reported fourth quarter earnings of 12 cents per limited-partner unit, which lagged the Zacks Consensus Estimate of 40 cents. Earnings also deteriorated 71.4% from the year-ago profit level of 42 cents. The downcast figures were due to loss of production from the closed Geismar olefins plant which will resume operation not before mid 2014. Lower natural gas liquids (NGLs) margins and higher operating costs from the Northeast G&P segment also added to the woes.

Quarterly total revenue also decreased 11.1% year over year to $1,616.0 million but surpassed the Zacks Consensus Estimate of $1,483.0 million. Notably, Williams Partners' distributable cash flow attributable to partnership operations in the fourth quarter was $509 million against $405 million in the year-ago quarter. Recently, the partnership increased its quarterly cash distribution by 7.9% year over year to 89.25 cents per unit.

Williams Partners is an energy master limited partnership engaged in gathering, transportation, treating and processing of natural gas as well as fractionation and storage of NGLs. The partnership owns interests in three major interstate natural gas pipelines that together deliver 14% of the natural gas consumed in the U.S. The partnership’s gathering and processing assets include large-scale operations in the U.S. Rocky Mountains as well as onshore and offshore Gulf of Mexico. The general partner of the partnership is owned and managed by Williams Companies Inc. (WMB).

Williams Partners currently carries a short-term Zacks Rank #3 (Hold). Meanwhile, one can consider better-ranked players in the energy sector like Helmerich & Payne Inc. (HP) and Pioneer Energy Services Corp. (PES). Both the stocks sport a Zacks Rank #1 (Strong Buy).

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