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Delek Logistics Partners LP: 15% Yield, Raised Dividend Again, New Dropdown Assets

Published Fri, 22 May 2020 09:15:00 -0400 on Seeking Alpha

DKL's general partner just dropped down $48M in trucking assets.
Management is guiding to 1.4X distribution guidance by year end based on the new assets.
They're also now targeting a reduced leverage ratio below 4X.
Management has raised the quarterly distribution 29 straight quarters.
Looking for survivors in the high-yield midstream space? Unlike many other high-dividend stocks which have cut their dividends, Delek Logistics Partners LP (DKL) has continued to increase its payouts in 2020.
This week, DKL's parent/general partner DKL Us (DK) announced an agreement for the dropdown of trucking assets to Delek Logistics for $48 million in cash. The transaction is effective May 1, 2020, and is expected to be immediately accretive to Delek Logistics' distributable cash flow per unit.
"These assets and services are projected to generate incremental annual earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $8 to $9M. Approximately 80 – 85% of this EBITDA guidance is supported by a minimum revenue commitment from Delek US. Delek Logistics will finance this dropdown through cash on hand and borrowings from its revolving credit revolver. Post closing of this transaction, Delek Logistics will have approximately $107 million available on the Revolver." (Source: DKL site)
In addition to this latest dropdown, DK also did a bigger dropdown on March 31, 2020, to DKL - its Big Spring Gathering System. These assets are expected to add $30 -$32 million Annual EBITDA to DKL, and are underpinned by Minimum Volume Commitments by DK to DKL.
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... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
DELEK US 36.53   5.7 6.41 1.16 3.17


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