Among the Master Limited Partnerships ((MLPs)), Buckeye Partners (NYSE: BPL) is one of the best performing companies with exceptionally attractive dividend yield. This partly fueled the soaring shares that already gained an astounding 45% growth for this year. This is backed by the firm's solid financials, as well.
Buckeye's Solid 1st Quarter Results
For the 1st quarter of 2013, Buckeye reported an impressive performance both in revenue and earnings. The company posted $1.345 billion total revenue, up 6% from $1.259 billion total revenue in the same quarter of 2012. It also posted strong net income of $90.5 million, up 68% from the $53.8 million net earnings during the year-ago quarter. Consequently, diluted earnings per share improved from $0.54 to $0.86 with 59% growth.
Revenues from the pipelines improved from $166 million to $194 million. But the international operations saw the highest jump in revenue from $50 million to $171 million. The natural gas storage also saw growth from $10 million to $14 million.
However, the energy services declined from $1.03 billion to $962 million. The capital additions of Buckeye also declined from $74 million to $67 million. The firm ended the quarter with $4.5 million in cash, down from $6.7 million in Q1 2012. But it also minimized its debt from $2.7 billion to $2.4 billion. Buckeye has market capitalization of $6.7 billion. Its P/E ratio is 26.44 with EPS of $2.63. Analysts set a one-year target for BPL at $70 per share, which it already achieved during the intraday trading on May 24, before shares retreated and closed at $69.53.
Buckeye's dividend against its peers
What attracted many investors to Buckeye is its high dividend yield of 6%. In 2012, the annualized dividend was $4.15 per share, evenly spread at $1.0375 per quarter. This year, it paid out the first quarter dividend at the same quarterly amount of $1.0375. For the 2nd quarter, the dividend payout was increased to $1.05 per share.
For the past decade, Buckeye steadily paid dividends to its shareholders. The quarterly dividend also increased quarter-over-quarter from 2004 until 2011. But since the 1st quarter of 2012 towards the 1st quarter of 2013, the quarterly amount remained unchanged. Nonetheless, it's back to quarterly growth again and hopefully the upcoming quarters will see steady growth quarter-over-quarter.
Buckeye's annualized dividend of no less than $4 per share is among the highest in the industry. In fact, Buckeye is listed in the top 10 high-yielding energy MLPs by Dividend.com. However, it is not the highest in terms of annualized dividend payout. One of its peers, Kinder Morgan Energy Partners (NYSE: KMP), has a higher annualized dividend with similar yield at 5.87%.
Kinder Morgan Energy Partners
In 2012, Kinder Morgan's annualized dividend was $5.85 per share, up 6% from the previous year's annualized dividend of $4.58 per share in 2011. For this year, it has already paid a total of $2.59 for the 1st and 2nd quarter at an increasing payout amount of $1.29 and $1.30 per share, respectively.
What is good about KMP is that the quarterly dividend steadily increased quarter-over-quarter since Q1 of 2012. While there were quarters where the dividend amount remained unchanged, the quarterly dividend was never slashed down since 2001, just like Buckeye.
Shares of Kinder Morgan were upbeat this year. It already gained 6% year-to-date. But this is a far cry from the YTD growth of BPL shares. While Kinder Morgan has slightly higher annualized dividend compared to Buckeye, its share performance while posting YTD growth is not as impressive as BPL's gain.
These two MLPs are the closest rivals in terms of annualized dividend and yield. Other MLP companies have annualized dividend below the $4 threshold. One MLP company closest to this level is Plains All American Pipeline (NYSE: PAA), which has a dividend yield of 3.88%.
Plains All American Pipeline
In 2011, Plains All American Pipeline paid out $3.905 in annualized dividend. The amount, however, decreased to only $3.6775 per share in 2012. In spite of that, this is still remarkably higher compared to other MLPs.
Just like Buckeye, Plains All American religiously paid dividends to all shareholders at an increasing rate quarter-over-quarter since 2004. But quarterly growth lasted only until the 3rd quarter of 2012. On the 4th quarter, it notably cut down the quarterly amount from the all-time high of $1.065 to only $0.5425 per share, back to the 2004 level. On the positive side, the amount steadily increased quarter-over-quarter from thereon.
Surprisingly, shares of Plains All American were not affected by the dividend cut in Q4 2012. Shares continued to remain upbeat towards the end of the year. When it enters the fiscal year 2013, shares even rallied further and gained 24.5% year-to-date. Nonetheless, Buckeye outperformed All Plains American in both dividend yield and YTD growth in shares.
Despite the impressive dividend history, Buckeye's solid financials remain the major catalyst to its current rally. When the company released the 1st quarter results on May 3, shares jumped 6% from $62.61 to $66.37 per share. Year-to-date, shareholders already gained $21.74 per share. This is on top of the $2.0875 dividend per share the firm already paid out this year. This makes Buckeye an attractive MLP for investment, and one of the best among the MLPs.
Although there are growing concerns about an upcoming correction given the fact that the rally has lasted more than a year already, as long as the company maintains its impressive financial performance, the expected correction is still out of sight. Analyst firms in Nasdaq shared the same view with no one recommending a sell. The majority of analysts advised a hold, while some voted for a strong buy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.