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10% Yield, 25 Straight Hikes, 10% Distribution Growth Ahead For Delek Logistics Partners

Published Sat, 29 Jun 2019 09:15:00 -0400 on Seeking Alpha

Midstream operator Delek Logistics Partners LP (DKL), the yieldco arm of Delek US (DK), has had several quarters of strong year-over-year EBITDA and DCF growth, as it acquired new assets from parent DK.
The sequential declines in Q1 '19 EBITDA and net income were due to lower throughput that was related to the turnaround at Delek U.S.'s El Dorado refinery reduced EBITDA by ~ $1.2 million, in addition to lower margins in its wholesale business. Its West Texas wholesale gross margin was $3.56/barrel in Q1 '19, vs. $5.16/barrel in Q1 '18. This was partially offset by increased contributions from its Big Spring logistics assets, which came on board in March 2018.
DCF has grown ~30% over the past 4 quarters, which has enabled DKL's management to keep raising the quarterly payouts, while simultaneously improving the coverage ratio to 1.16X.
The General Partner's Incentive Distribution Rights - IDRs - grew by more than 39%, but only rose 7% as a share of DCF. Management has previously said that they would probably make a decision about the long-term structure of the GP and the LP by the end of 2019.

DKL's logistics assets exist mainly to serve DK's petroleum refining assets and transportation services. In this type of arrangement, the parent/sponsor sells/drops down assets to the yieldco LP, which in turn funds these acquisitions via a combination of equity and debt.
The yieldco usually has an attractive distribution yield in order to garner... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
PLAINS ALL AM. PIPELINE 21.20   5.3 3.99 1.44 6.75
DELEK US 36.53   5.7 6.41 1.16 3.17


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