Please ensure Javascript is enabled for purposes of website accessibility

Shares of Holly Energy Partners Surged 15% in March. Here's Why.

By Tyler Crowe - Apr 11, 2016 at 7:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Getting the thumbs-up from its lenders and credit ratings agencies gave shares of Holly Energy Partner's a nice boost last month.

Image source: U.S. National Archives via Wikimedia Commons.

What: Shares of Holly Energy Partners (HEP -0.86%) climbed 15.1% in March, thanks to two big bumps to its financial standing: a reaffirmation of its credit rating, and an increase on the borrowing limit for its credit facilities.

So what: One of the biggest concerns facing master limited partnerships over the past several months is that the cheap financing that has fueled the immense growth of many pipeline and midstream companies would start to dry up. Without access to capital though either debt or equity, it would be difficult for companies in the space to fund projects that pay those sizable dividends. 

It's with this backdrop in mind that you can understand why Holly Energy Partners' stock jumped as much as it did last month: On March 11, the company announced that the borrowing limit on its credit facility had increased from $850 million to $1.2 billion, and on March 15, Moody's reiterated the company's Baaa3 credit rating, an investment-grade level. That's pretty important, because several companies that had investment-grade ratings have lost them in recent months, suggesting that Holly Energy Partners is still one of the best in the business in terms of keeping its financial house in order. 

Now what: Despite the modest increase in March, shares of Holly Energy Partners are still trading at a pretty attractive distribution rate of greater than 6.6%. At the same time, management is still keeping its payout rather modest compared with the amount of cash it brings in on a quarterly basis. With a larger credit line and the green light from Moody's to use debt a little to finance some growth, it looks like Holly Energy Partners should be well placed to keep its 44 consecutive quarters of distribution increases on track.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Holly Energy Partners, L.P. Stock Quote
Holly Energy Partners, L.P.
HEP
$18.42 (-0.86%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.