Crestwood Equity Partners: Higher Distributions Could Follow Their Stagecoach Divestiture

Summary

• Crestwood Equity Partners managed to defy the pressure of 2020 and sustained their distributions, which could now grow higher following their Stagecoach divestiture.
• Once completed, it appears that the divestiture of these assets will reduce their earnings and thus operating cash flow by approximately 10%.
• Thankfully they should still have strong distribution coverage that provides scope for higher payments to unitholders.
• Since their net debt will decrease by over 20%, this divestiture will reduce their leverage and thus improve one of the biggest previous issues with their units as an income investment.
• Following this improving outlook, it should be of little surprise that my bullish rating is being maintained for their high near 9% distribution yield.

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Introduction

Throughout the turbulent year of 2020, it looked as though Crestwood Equity Partners (CEQP) would succumb to the pressure and reduce their distributions but surprisingly they were sustained, as my previous article discussed. Whilst the safety of their

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in CEQP over 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.