This MLP Has 17 Consecutive Years Of Distribution Growth & A 6.4% Yield

The crash in oil and natural gas prices over the past two years was one of the worst periods for the energy sector in recent memory. Business conditions got so bad that many MLPs had to cut or eliminate their distributions. This was a severe blow to investors, who buy and hold MLPs mainly for income.

But there are still many well-run MLPs that generate enough cash flow to sustain their distributions. Some have continued to raise their distributions on a regular basis, even though oil prices remain about 50% below their 2014 peak levels.

For example, TC PipeLines (TCP) has raised its distribution for 17 consecutive years. Its most recently declared distribution was 6% higher than the same distribution last year.

TC PipeLines is a Dividend Achiever. You can see the entire list of all 272 Dividend Achievers here.

It has paid 70 consecutive quarterly distributions without interruption. Today, the stock offers a hefty 6.4% distribution yield.

TCP Yield

This article will analyze TC PipeLines’ business model and future prospects.

Business Overview

TC PipeLines operates in the midstream energy industry. This means it is engaged in transportation, rather than exploration and production or refining.

One major reason why TC PipeLines has been spared from of the fallout of the oil crash is because it operates in natural gas.

The company has interests in approximately 5,900 miles of federally regulated, interstate natural gas pipelines. Its assets have a total capacity for 9.1 billion cubic feet per day of natural gas.

TCP Assets

Source: Wells Fargo Annual Energy Symposium, page 4

The Partnership is managed by its general partner, TC PipeLines GP, Inc., a subsidiary of TransCanada Corporation (TRP).

Another reason why the company’s distribution growth remained unimpeded through the commodity crash is because its assets are predominantly fee-based.

These assets are extremely stable, because they are managed under take-or-pay style contracts. TC PipeLines operates similarly to a toll road, in that it collects fees based on the volumes of natural gas it transports through its assets.

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