Pipeline operator MarkWest Energy Partners L.P. ( MWE - Analyst Report ) – a master limited partnership (MLP) – increased its quarterly common stock distribution by 1.2% to 82 cents per unit ($3.28 per unit annualized). This payout is 7.9% higher on an annualized basis. The new distribution will be paid on Feb 14, 2013, to shareholders of record as of Feb 6, 2013.

The strength of MarkWest’s business model reflects the partnership’s commitment toward returning value to shareholders with its strong cash generation capabilities. Prior to this revision, the company had increased its quarterly distribution by 1.3% in Oct 2012.

During the third quarter of 2012, MarkWest generated distributable cash flow (DCF) – an indicator of cash paid for distribution to unitholders – of $104.3 million, up from $85.3 million in the prior-year quarter, providing 1.09x distribution coverage.

We believe that the increase in distribution will boost investors’ confidence in the stock, thereby driving unit value.

Denver, Colorado-based MarkWest Energy Partners LP is engaged in the gathering, processing and transmission of natural gas, transportation, fractionation and storage of natural gas liquids (NGLs), and the gathering and transportation of crude oil.

However, gathering and processing MLPs, like MarkWest, are more sensitive to commodity prices compared with other MLP subgroups. As a result, collapsing energy prices have adversely affected their cash flow stability.

Additionally, as is the case with other MLPs, the actual amount of cash distributed to MarkWest unitholders may fluctuate and are directly exposed to the partnership’s future operating performance, which is susceptible to movements in margins and throughput volumes. Realized margins and/or volumes could differ significantly from our estimates, thereby affecting MarkWest’s cash distributions.

MarkWest Energy currently carries a Zacks Rank #5 (Strong Sell). Besides MarkWest Energy, Williams Companies Inc. ( WMB - Analyst Report ) and Williams Partners L.P. ( WPZ - Snapshot Report ) with Zacks Rank #3 (Hold) as well as Western Refining Inc. ( WNR - Analyst Report ) with Zacks Rank #2 (Buy) also increased their capital redeploying efforts recently through payout increases.