El Paso Pipeline Partners L.P.

El Paso Pipeline Partners L.P. (EPB - Snapshot Report), which operates natural gas pipelines, increased its cash distribution to unitholders by 6.7% in January as business remained solid. EPB's dividend currently yields 7.20%. The company is trading at 12.5x forward earnings.

Company Description

El Paso Pipeline Partners is a limited partnership that operates natural gas transportation pipelines and storage. The partnership owns Wyoming Interstate Company, an interstate pipeline transportation business located mainly in Wyoming and Colorado.

It also owns a 40% general partner interest in Colorado Interstate Gas Company (CIG) located in the Rocky Mountains and a 25% interest in Southern Natural Gas Company (SNC), an interstate natural gas company in the southeastern states.

In total, these businesses consist of about 12,300 miles of pipeline and storage facilities.

The partnership was formed by El Pas Corporation to run the assets. El Paso is the largest operator of interstate natural gas pipelines in North America, owning an interest in 42,000 miles of pipeline.

El Paso Raises Its Distribution

On Jan 20, the partnership raised its quarterly distribution by 6.7% to 32 cents per unit for the fourth-quarter 2008 from 30 cents in the prior quarter. The distribution will be paid as of Feb 13 to all unitholders as of the close of business on Jan 30.

"We are pleased to raise our cash distributions as a result of our successful acquisition last year," said Jim Yardley, president and chief executive officer.

"The distribution increase continues our history of raising full quarter distributions since we went public in 2007."

Net Income Jumped 19.5% in the Third Quarter

On Nov 6, El Paso Pipeline Partners reported third quarter 2008 results which saw net income increase 19.5% to $20.8 million from $17.4 million in the year ago period. Net income growth was mainly due to increased earnings from equity investments and the completion of pipeline expansion projects.

During the quarter, the partnership increased its interest in CIG and SNG to 40% and 25%, respectively. The acquisition was financed by the issuance of 27.8 million common units and $150 million of debt.

The acquisition was financed by the issuance of 27.8 million common units, 0.6 million general partner units, and $250 million of debt.

Despite the recent additional debt, the partnership maintains a $750 million revolving credit facility. As of Sep 30, 2008, it had $150 million available capacity. EPB does not anticipate needing to access the capital markets until after 2009.

Consensus Estimates

It's been pretty quiet on the estimates front. Fourth-quarter estimates are unchanged from 3 months ago, at 34 cents. 2008 full-year have fallen 2 cents in the last 90 days whereas full-year 2009 estimates have been holding at $1.41 over that time period.

EPB is scheduled to report fourth-quarter earnings on Feb 26.

Value Fundamentals

El Paso Pipeline Partners is a Zacks #1 Rank (strong buy) stock. It has surprised on earnings 2 out of the last 4 quarters.

EPB is trading at 12.5x forward earnings. It has a price-to-book of 1.6. The company has a solid 1-year return on equity (ROE) of 19.75%. El Paso Partners also is paying a distribution with a current yield of 7.20%.