GasLog Preferred Units: 9.6% Yield Is Worth Considering

Feb. 07, 2020 10:16 AM ETGasLog Partners LP (GLOP), GLOP.PAGLOG71 Comments

Summary

  • GasLog Partners just announced record-breaking positive earnings results. Yet management decided to proactively slash the distribution to build cash flow strength for future opportunities.
  • The distribution cut to the common units actually benefits the preferred units, but they still sold off in sympathy with the common.
  • if you are an income-focused investor that likes to buy attractive big yields at discounted prices, GLOP preferred units (9.6% yield) are worth considering.
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GasLog Partners (NYSE:GLOP) just announced all time high revenue, EBITDA and distributable cash flow, not to mention a solid 1.2x distribution coverage ratio. The company also raised its distribution in 2019 and bought back a significant amount of its common units. Further still, during the latest earnings call, management explained they remain very confident in the company's long-term outlook. This all sounds like a very attractive business, but the units plummeted about 49% after the earnings announcement because management dramatically reduced the upcoming distribution payment to unitholders, explaining they are "moving to a strategy that prioritizes the strengthening of our balance sheet through debt reductions." In our view, these actions make the company's preferred units significantly more attractive (because it frees up more cash flow to support them), yet the preferreds were dragged lower in sympathy with the common, thereby creating an increasingly attractive buying opportunity in GasLog's 9.6% yield preferred units.

(image source: GasLog Q4 Earning Presentation)

Image result for gas log logo

Overview

GasLog Partners LP is a master limited partnership (MLP) that owns, operates and acquires LNG carriers. It was created by GasLog Limited (GLOG) in 2014, which currently owns ~35% of limited partnership (LP) units and a 2.0% general partner (GP) interest.

GLOP's fleet consists of 15 LNG carriers, including 10 vessels with tri-fuel diesel electric (TFDE) propulsion and five modern steam turbine propulsion (steam) vessels. GLOP has options and rights under which it may acquire additional LNG carriers from its parent GasLog Limited. We believe that such options and rights provide it with significant built-in growth opportunities.

(image source: GasLog Q4 Earning Presentation)

No K-1

GasLog Partners LP has elected to be treated as a C-Corporation for U.S. federal income tax purposes. This means investors receive a Form 1099 and not a Schedule K-1. This is important because it makes life easier for investors

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Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in GLOP.PA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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