Tags: Buckeye | BPL | energy | pipelines

Buckeye Partners: High Yield and Growing Dividend

By    |   Monday, 26 Sep 2011 11:42 AM

Buckeye Partners (BPL) strives to provide shareholder value through a growing revenue stream and a steadily increasing dividend distribution. Investors should pay attention to the company's business model and decide if the recent growth initiatives can be repeated.

Buckeye Partners is a mid-stream energy company providing pipeline and terminal services for liquid petroleum products. Assets include more than 5,000 miles of pipeline and 60 terminals. The company transports gasoline, heating oil, and diesel fuel through its pipelines. The partnership also owns natural gas storage facilities and provides management services to other companies with pipeline assets.

In November 2010 the company completed the merger of Buckeye GP Holdings L.P. into Buckeye Partners L.P. The merger eliminated the overhead and management expenses of having essentially two companies managing the same assets.

In the 2011 second quarter the company reported adjusted EBITDA of $117.6 million, up from $91.7 million a year earlier. For energy limited partnerships like Buckeye Partners, the driving financial number is the distribution rate. With the latest $1.0125 per unit distribution. The payout has been increased for 29 consecutive quarters. The distribution growth rate over the seven year period has been about 5 percent per year.

Growth through acquisition

Buckeye Partners management works to increase EBITDA and distributions through efficient management of existing assets and an active policy of acquisitions. The company tends to buy the pipeline assets of energy companies which are really not interested in the energy transport business, such as its second-quarter purchase of 650 miles of pipeline and 30 petroleum products terminals from BP America. Since 2008, Buckeye Partners has been averaging three acquisition deals per year.

The most recent analyst change on BPL was an upgrade to buy from neutral from the analysts at UBS. Earlier this year the Oppenheimer analysts initiated coverage on the stock with an outperform rating and a $75 target price. The company reports next on Nov. 11.

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Buckeye Partners (BPL) strives to provide shareholder value through a growing revenue stream and a steadily increasing dividend distribution. Investors should pay attention to the company's business model and decide if the recent growth initiatives can be repeated. Buckeye...
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2011-42-26
Monday, 26 Sep 2011 11:42 AM
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