By Siraj Sarwar
Due to the attractive combination of strong growth and gradually rising distributions, master limited partnerships [MLPS] have become a famous choice for the vast majority of investors. Unit holders in MLPs generally receive attractive distributions because the partnerships benefit from favorable tax rules. In some instances, MLPs also may provide growth potential. For some MLPs, it is realistic to anticipate receiving both price appreciation and dividend income, despite the fact that some growth stocks historically have paid either no dividends or extremely low dividends.
In this article, I pick three MLPs that have provided significant returns to their unit holders. Thanks to strong business models, together with price appreciation, these stocks were also able to pay substantial dividends in the past years. These three stocks are Sunoco Logistic Partners (NYSE:SXL), BreitBurn Energy Partners (NASDAQ:BBEP), and Calumet Specialty Product Partners (NASDAQ:CLMT). All three MLPs have constantly offered gigantic returns to shareholders over the past years. I believe that these MLPs can be a smart inclusion to any portfolio, whether it is focused on dividends, growth or both.
Calumet Specialty Products Partners L.P. is a producer of hydrocarbon products in North America. Over the years, the partnership has been returning substantial returns to investors. In the past year alone, the partnership has increased its distributions by 16.07%. Over the past five years, Calumet has been able to increase distributions by 44.44%. Recently, the partnership announced a quarterly distribution of $0.65 cents/unit. For the full year of 2012, the partnership paid distributions of $2.30 per unit.
CLMT Dividend data by YCharts
On the other hand, over the year, the stock has shown exceptional growth. Its stock gained nearly 43.56% in the last year alone. Moreover, as shown in the above chart, in the past five years, its stock gained nearly 188.6%. The stock is currently trading at attractive multiples based on P/S and P/E ratio of 0.5 and 11.1. However, with a forward P/E of 13.6, the MLP's price will steadily further appreciate.
Additionally, the partnership has shown an outstanding revenue and earnings growth over the prior three years. In the past three years, on average, the partnership has been able to grow revenues by 36.2%. At the end of 2009, it had generated revenues of $1,847 million, which enlarged to $4,657 million by the end of 2012. Additionally, since 2010, the partnership was able to enlarge earnings by 190 million.
Figure in Million
Operating cash flow
Free cash flow
Furthermore, Calumet has shown exceptional cash flow growth. Its operating cash flows are escalating at a strong rate; since2009 the partnership's operating cash flows grew by nearly $279 million. Additionally, at the end of 2012, the partnership was able to increase distributable cash flow by $21.5 million over the earlier year. This signifies a gigantic increase in distributions that can be predicted by seeing its outstanding financial performance.
Sunoco Logistics Partners owns and operates a diverse portfolio of assets. The partnership has a combination of both strong business model and solid investment strategy. Over the years, the partnership has been returning substantial returns to investors. In the past year alone, the partnership has increased its distributions by 27.49%. Over the past five years, Sunoco has been able to increase distributions by 82.68%.
SXL data by YCharts
On the other hand, over the year, the stock has shown exceptional growth. Its stock gained nearly 68% in the last year alone. Moreover, as shown in the above chart, in the past five years, its stock gained nearly 315.7%. The stock is a bit pricey based on P/B and P/E of 4.8 and 17.4. However, I believe the MLP's price will further appreciate with a forward P/E of 15.3. I think it is a buy and hold stock for long-term returns.
Furthermore, the partnership has a strong and flexible capital structure to continue its growth plans. The partnership has been executing an energetic business plan. Its business plan involves both escalating the efficient utilization of existing assets and acquiring new assets for further expansion of cash flows. Until now, the partnership's business plan worked quite well. As the above chart demonstrates, its investors are enjoying substantial returns from both price appreciation and also dividends.
BreitBurn Energy Partners is an independent oil and gas partnership. Over the years, the partnership has been returning substantial returns to investors. Over the past three years, BreitBurn has been able to increase distributions by 25.33%. Recently, the partnership announced a quarterly distribution of $0.47 cents/unit. For the full year of 2012, the partnership paid distributions of $1.83 per unit.
BBEP Dividend data by YCharts
On the other hand, over the year, the stock has shown an outstanding growth. Its stock gained nearly 43.56% in the last year alone. Moreover, as shown in the above chart, in the past three years, its stock gained nearly 40.85%. At present, its stock is trading at attractive multiples; I believe the MLP's price will further appreciate with a forward P/E of 44.0.
Its price and distributions are strongly backed by a sustained solid financial performance. For the full year of 2012, the partnership generated record production and adjusted [EBITDA], which increased 18% and 31%, respectively, over 2011. Furthermore, the partnership's cash flows are in a strong condition to support dividends and acquisitions.
Additionally, the partnership has been benefiting immensely by its acquisitions. With the recent acquisition, it was able to generate record production in 2012. At the end of 2012, it has completed seven acquisitions in Texas, California, and Wyoming. The partnership has exceeded its acquisition target of $300 million to $500 million.
BreitBurn is well positioned to continue its 2013 capital program and its growth through acquisitions strategy. Over the past two years, some MLPs had financial problems because the price of Natural Gas Liquids [NGL] has recently been abnormally low. However, BreitBurn has a extremely little exposure to NGL, which makes it even more attractive for both value and dividend investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Efsinvestment is a team of analysts. This article was written by Siraj Sarwar, one of our equity analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.