In 2016 Martin Midstream Partners cut its quarterly distribution from $0.8125 to $0.5000. The price fell in the mid teens in terms of percent for the year - in a year when the sector average was up in the mid teens. MMLP ended 2016 with a yield of 10.90% and what then looked like very good current distribution (or after the cut) coverage. And that caused what I label "supporters of the justifiably down trodden stocks" like Double Dividend Stocks and Rida Morwa to produce pro-MMLP articles.
I would call the Q1-17 numbers "not good enough". For example, the cut in the distribution significantly cut earnings going to the general partner. In Q1-16, $4.547 million of gross DCF went to the general partner. In Q1-2017, $0.272 million of gross DCF went to the general partner. If gross DCF had staid roughly the same, DCF going to the holders of the MMLP partnership would have been up (4275 / 35372) twelve cents per share. But new units were added (to address credit metric issues) and gross DCF fell. Q1-17 DCF was $0.80 compared to Q1-2016's $0.79. It is an improvement, but given the conditions, the improvement is "not good enough".
New units were sold to reduce debt and improve the credit metrics. And the current Debt/EBITDA number of 4.22x is a good enough numbers. Less debt resulted in a falling quarterly cost of interest compared to Q4-16 - but not compared to Q1-17. Add to that problem, EBITDA is falling. The interest coverage ratio has improved from Q3-16's really ugly 2.83x. But the Q1-17 coverage is less than the Q1-16 coverage. There is improvement - but not year over year improvement. There is improvement, but it is not good enough.
As of 4/21/2017 MMLP sold at a yield of 10.18%. There is probably more risk priced into MMLP than it merits . . but not a lot. Even if it is under valued, it has commodity sensitive earnings that should scare away most - if not all - conservative investors.
My spreadsheet on the Q1-17 and historical numbers:
Martin Midstream Partners metrics
|DCF to GP||272||361||361||4,546||4,547||4,041||3,975||4,157||4,305||x||(539)||(19)||x|
|I could not find DCF going to the GP in 2014. There were 'after the reporting date' changes to quarterly EBITDA numbers in '16. Reported in Q4-16 2016 - EBITDA of 176,577 but the quarter's sum to 180,342|
|Long Tern Debt||750,735||808,107||913,504||878,891||873,611||865,103||876,405||840,159||849,369||888,887|
|Long Term Debt/EBITDA||4.22x||4.58x||5.51x||5.13x||5.00x||4.98x||5.05x|
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.