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10% Yield, 26 Straight Hikes, 10% Distribution Growth For Delek Logistics Partners

Published Fri, 20 Sep 2019 09:15:00 -0400 on Seeking Alpha

Looking for distribution growth? The management of midstream operator Delek Logistics Partners LP (DKL), the yieldco arm of Delek US (DK), has raised DKL's quarterly payouts in 26 straight quarters since the company's IPO in 2013. They raised it from $.82 to $.85 for their August Q2 '19 distribution.
DKL's logistics assets exist mainly to serve general partner 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 support for its publicly traded units.
DKL and DK both share the same management, and DK owns 94.6% of the GP interest and a 61.5% interest in the LP's common units. DK, with a $2.9B market cap, has a strong refining presence in the Permian basin, after buying ALON USA in 2017, in addition to diversified assets, including retail stores, asphalt terminals, and renewables:

DKL's net income fell by ~$800M in Q2 '19 due to lower throughput on its assets, which was related to the turnaround of its El Dorado refinery. In addition, West Texas wholesale gross margin was $6.25/barrel in Q2 2019, vs. $8.06/barrel in Q2 '18. EBITDA was flattish and DCF fell by -7%. This should be reversed in coming quarters, as earnings from its Red River JV start to build.
Looking back over the past four... 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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10% Yield, 25 Straight Hikes, 10% Distribution Growth Ahead For Delek Logistics Partners