These MLP Distributions Have Been Climbing for More Than 5 Years Straight

It was just this past October when Eagle Rock Energy Partners announced it would cut its distribution more than 30%. Barely two months into 2014, investors have watched another master limited partnership (MLP) fall victim to the same fate, as Boardwalk Pipeline Partners cut its payout an astounding 80%.

Distribution cuts are the cardinal sin for MLPs, and these recent happenings have investors searching for high-quality picks with safe distributions. Today, we'll look at three potential picks that might fill such a role: EV Energy Partners (NASDAQ: EVEP  ) , Spectra Energy Partners (NYSE: SEP  ) , and Alliance Resource Partners (NASDAQ: ARLP  ) .

First and foremost, investors want to see consistency. All three of the MLPs on today's list have increased their distributions every quarter for at least the last five years. In EV Energy Partners' case, it has been seven straight years of consecutive increases.

EVEP Dividend Chart

EVEP Dividend data by YCharts.

Right off the bat you can see how deceiving a statistic like this can be. EV Energy Partners (EVEP) has increased its distribution for 28 straight quarters, while Spectra Energy Partners has done so for 25 straight quarters, but clearly they are not walking the same path here. EVEP's distribution growth has been anemic since 2009, despite its increase pattern.

Still, Spectra Energy Partners and Alliance Resource Partners look pretty good here. But consistently increasing distributions is only well and good if the MLP is also generating enough cash to actually cover them. If it isn't, the future may hold a Boardwalk Pipeline-type surprise.

That's why investors also want to consider the distribution coverage ratio, which is simply distributable cash flow divided by distributions paid. Here's how today's group stacks up:


Current Coverage Ratio

EV Energy Partners


Spectra Energy Partners


Alliance Resource Partners



Surprisingly, Alliance Resource Partners -- the coal MLP! -- looks the best here. The partnership reported record results for coal sales, net income, and EBITDA in 2013, and was able to grow its distribution more than 8% for the fourth quarter.

EV Energy Partners again fails to impress. Though the partnership has yet to post its fourth-quarter earnings, which will impact its ratio here, it did not approach full coverage in any of the first three quarters of 2013.

Spectra Energy barely fails here. The partnership posted full coverage in the first quarter of 2013 before dropping off in the second and slowly rebounding in the third and fourth. The partnership is planning for distribution growth between 8% and 9% through 2016, and investors should expect to see coverage back up over 1.0 times payouts if that is the case.

Bottom line
Master limited partnerships can be complicated investments, and these two figures are not the only ones that matter. That said, they will give you some sense of how strong an MLP is from a mile up. As always, if you do plan to invest in one of these vehicles, make sure due diligence is part of your process.

Nine dividend winners
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend-paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2837600, ~/Articles/ArticleHandler.aspx, 8/31/2015 10:10:19 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Aimee Duffy

Contributing to since 2011.

Today's Market

updated 54 minutes ago Sponsored by:
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASD 4,776.51 -51.82 -1.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/31/2015 3:59 PM
ARLP $25.58 Up +0.26 +1.03%
Alliance Resource… CAPS Rating: ***
EVEP $8.94 Up +0.65 +7.84%
EV Energy Partners… CAPS Rating: **
SEP $50.94 Down -0.17 -0.33%
Spectra Energy Par… CAPS Rating: *****